<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

(Mark One)
(X)      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the quarterly period ended September 30, 2003.

( )      Transition report pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934 for the transition period ______ to ______.

                           Commission File No. 1-13925

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      ------------------------------------
             (Exact name of registrant as specified in its charter)

           Delaware                                     38-3389456
           --------                                     ----------
  (State or other jurisdiction of             (IRS Employer Identification No.)
  Incorporation or organization)

            5350 Lakeview Parkway Drive South, Indianapolis, IN 46268
            ---------------------------------------------------------
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (317) 715-4100
                                 --------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]  No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 126-2 of the Securities Exchange Act). Yes [ ] No [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

    COMMON STOCK $0.01 PAR VALUE                  14,718,134 SHARES
    ----------------------------                  -----------------
      (class of common stock)              (outstanding at October 1, 2003)

                         This report contains 41 pages.

                                       1

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                 PAGE
<S>                                                                                              <C>
PART I - FINANCIAL INFORMATION

      ITEM 1.     CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

                  Consolidated Balance Sheets as of September 30, 2003 and
                  December 31, 2002                                                               3

                  Consolidated Statements of Operations for the Three and Nine Months
                  Ended September 30, 2003 and 2002                                               4

                  Consolidated Statement of Stockholders' Equity for the Nine Months
                  Ended September 30, 2003                                                        5

                  Consolidated Statements of Cash Flows for the Nine Months Ended
                  September 30, 2003 and 2002                                                     6

                  Notes to Consolidated Financial Statements                                      7

      ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                  17

      ITEM 3.     QUANTITATIVE AND QUALITATIVE DISCLOSURES                                       37
                  ABOUT MARKET RISKS

      ITEM 4.     CONTROLS AND PROCEDURES                                                        37

PART II - OTHER INFORMATION

      ITEM 1.     LEGAL PROCEEDINGS                                                              39

      ITEM 3.     DEFAULTS UPON SENIOR SECURITIES                                                39

      ITEM 4.     SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                            39

      ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K                                               40

SIGNATURES                                                                                       41

EXHIBITS
</TABLE>

                                       2

<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                           CONSOLIDATED BALANCE SHEETS
                 AS OF SEPTEMBER 30, 2003 AND DECEMBER 31, 2002
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                           SEPTEMBER 30, 2003   DECEMBER 31, 2002
                                                                                           ------------------   -----------------
                                                                                               (UNAUDITED)

<S>                                                                                        <C>                  <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                                   $     2,099         $     6,773
   Short-term investments                                                                           17,551              79,489
   Accounts receivable (net of allowance for doubtful accounts
      of $1,823 and $1,282 at September 30, 2003 and December 31, 2002, respectively)                3,774               4,657
   Prepaid expenses and other current assets                                                         6,116               1,474
   Income tax refundable                                                                               695              10,087
   Deferred income taxes                                                                                --               1,184
   Current portion notes receivable                                                                    132                  --
                                                                                               -----------         -----------
      Total current assets                                                                          30,367             103,664

NOTES RECEIVABLE                                                                                       891                  --
PROPERTY AND EQUIPMENT-Net                                                                          11,847              10,403
GOODWILL                                                                                                --                  --
OTHER ASSETS                                                                                           548                 384
                                                                                               -----------         -----------
TOTAL ASSETS                                                                                   $    43,653         $   114,451
                                                                                               ===========         ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Long term debt-current portion                                                              $     2,523         $        --
   Accounts payable                                                                                  3,768               1,703
   Accrued liabilities:
      Race expenses and point awards                                                                 3,316                  --
      Royalties                                                                                         90                 173
      Payroll                                                                                          600               2,455
      Taxes                                                                                            454                 743
      Other                                                                                          4,950               4,879
   Deferred revenue                                                                                  3,272               1,423
                                                                                               -----------         -----------
      Total current liabilities                                                                     18,973              11,376

DEFERRED INCOME TAXES                                                                                   --                  57
STOCKHOLDERS' EQUITY:
   Preferred stock, $.01 par value; 5,000,000 shares
      authorized, none issued and outstanding at September 30, 2003
      and December 31, 2002                                                                             --                  --
   Common stock $.01 par value, 50,000,000 shares authorized, 14,718,134
      and 14,718,134 shares issued and outstanding at September 30, 2003
      and December 31, 2002, respectively                                                              147                 147
   Additional paid-in capital                                                                       87,765              87,765
   Accumulated earnings (deficit)                                                                  (63,396)             14,511
   Accumulated other comprehensive income                                                              164                 595
                                                                                               -----------         -----------
         Total stockholders' equity                                                                 24,680             103,018
                                                                                               -----------         -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                                     $    43,653         $   114,451
                                                                                               ===========         ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       3
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
         FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT LOSS PER SHARE)

<TABLE>
<CAPTION>
                                                                THREE MONTHS               NINE MONTHS
                                                              ENDED SEPTEMBER 30,       ENDED SEPTEMBER 30,
                                                               2003         2002         2003         2002
                                                               ----         ----         ----         ----
<S>                                                         <C>          <C>          <C>          <C>
REVENUES:
 Sanction fees                                              $    7,831   $   12,555   $   16,131   $   27,082
 Sponsorship revenue                                             2,623        2,934        6,591        8,039
 Television revenue                                                831        1,967        1,734        4,230
 Race promotion revenue                                          5,607           --       10,628        1,417
 Engine lease revenue                                              475           --        1,425           --
 Other revenue                                                     803        1,081        2,233        2,665
                                                            ----------   ----------   ----------   ----------
      Total revenues                                            18,170       18,537       38,742       43,433

EXPENSES:
 Race distributions                                             21,067        8,427       49,728       15,778
 Race expenses                                                   2,589        4,110        6,530        8,432
 Race promotion expense                                          9,874        5,452       20,784        8,935
 Television expense                                              6,492        4,892       13,910        9,604
 Administrative and indirect expenses                            6,115        8,966       16,334       20,762
 Litigation and settlements expense                              1,281           --        2,660           --
 Merger and strategic charges                                    1,355           --        1,355           --
 Relocation expense                                                 --           --           --        1,305
 Asset impairment                                                3,299           --        3,299           --
 Depreciation and amortization                                     998          357        2,842        1,045
                                                            ----------   ----------   ----------   ----------
      Total expenses                                            53,070       32,204      117,442       65,861

OPERATING LOSS                                                 (34,900)     (13,667)     (78,700)     (22,428)
 Realized gain on sale of investments                              248            2          332            2
 Interest income                                                   248          882        1,121        3,083
                                                            ----------   ----------   ----------   ----------
LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF
      ACCOUNTING CHANGE                                        (34,404)     (12,783)     (77,247)     (19,343)
 Income tax expense (benefit)                                       --       (4,473)         660       (6,769)
                                                            ----------   ----------   ----------   ----------
LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE          $  (34,404)  $   (8,310)  $  (77,907)  $  (12,574)
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (NET OF TAX)         $       --   $       --   $       --   $     (956)
                                                            ----------   ----------   ----------   ----------
NET LOSS                                                    $  (34,404)  $   (8,310)  $  (77,907)  $  (13,530)
                                                            ==========   ==========   ==========   ==========
LOSS PER SHARE BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGE:

             BASIC                                          $    (2.34)  $    (0.56)  $    (5.29)  $    (0.85)
                                                            ==========   ==========   ==========   ==========
             DILUTED                                        $    (2.34)  $    (0.56)  $    (5.29)  $    (0.85)
                                                            ==========   ==========   ==========   ==========
NET LOSS PER SHARE:

             BASIC                                          $    (2.34)  $    (0.56)  $    (5.29)  $    (0.92)
                                                            ==========   ==========   ==========   ==========
             DILUTED                                        $    (2.34)  $    (0.56)  $    (5.29)  $    (0.92)
                                                            ==========   ==========   ==========   ==========
WEIGHTED AVERAGE SHARES OUTWSTANDING:

             BASIC                                              14,718       14,718       14,718       14,718
                                                            ==========   ==========   ==========   ==========
             DILUTED                                            14,718       14,718       14,718       14,718
                                                            ==========   ==========   ==========   ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       4
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                 CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
                                   (UNAUDITED)
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                              COMMON STOCK    ADDITIONAL
                                             ---------------   PAID-IN       ACCUMULATED
                                             SHARES   AMOUNT   CAPITAL    EARNINGS (DEFICIT)
                                             ------   ------   -------    ------------------
<S>                                          <C>      <C>     <C>         <C>
BALANCES, JANUARY 1,  2003                   14,718    $147    $87,765        $ 14,511
   Net loss                                      --      --         --         (77,907)
   Unrealized loss on investments                --      --         --              --
   Increase in valuation allowance,
      deferred taxes                             --      --         --              --
   Reclassification adjustment, available-
      for-sale securities                        --      --         --              --
   Comprehensive loss                            --      --         --              --
                                             ------    ----    -------        --------
BALANCES, SEPTEMBER 30, 2003                 14,718    $147    $87,765        $(63,396)
                                             ======    ====    =======        ========
</TABLE>

<TABLE>
<CAPTION>
                                                ACCUMULATED OTHER
                                                  COMPREHENSIVE      STOCKHOLDERS'    COMPREHENSIVE
                                                  INCOME (LOSS)         EQUITY            LOSS
                                                  -------------        --------         ---------
<S>                                             <C>                  <C>              <C>
BALANCES, JANUARY 1,  2003                             $595            $103,018
   Net loss                                              --             (77,907)        $ (77,907)
   Unrealized loss on investments                      (272)               (272)             (272)
   Increase in valuation allowance,
      deferred taxes                                     57                  57                57
   Reclassification adjustment, available-
      for-sale securities                              (216)               (216)             (216)
                                                         --                  --         ---------
   Comprehensive loss                                  ----            --------         $ (78,338)
                                                       $164            $ 24,680         =========
BALANCES, SEPTEMBER 30, 2003                           ====            ========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       5
<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
              FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003 AND 2002
                                   (UNAUDITED)
                             (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                                          2003               2002
                                                                                        --------           --------
<S>                                                                                     <C>                 <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                           $(77,907)          $(13,530)
     Adjustments to reconcile net loss to
           net cash provided by (used in) operating activities:
     Cumulative effect of accounting change (net of tax)                                      --                956
     Asset impairment                                                                      3,299                 --
     Depreciation and amortization                                                         3,123              1,045
     Net loss from sale of property and equipment                                            636                 17
     Deferred income taxes                                                                 1,127             (7,743)
     Changes in assets and liabilities that provided (used) cash (net of effects
           from purchase of Raceworks, LLC):
           Accounts receivable                                                             1,210             (3,997)
           Notes receivable                                                                 (400)                --
           Inventory                                                                          --                (25)
           Prepaid expenses and other assets                                              (4,675)             1,303
           Income tax refundable                                                           9,392                 --
           Accounts payable                                                                  339              2,025
           Accrued liabilities                                                             1,160              2,890
           Deferred revenue                                                                1,670              6,630
                                                                                        --------           --------
                   Net cash used in operating activities                                 (61,026)           (10,429)

CASH FLOWS FROM INVESTING ACTIVITIES:
     Payments for purchase of Raceworks, LLC, net of cash acquired                          (462)                --
     Purchase of investments                                                              (7,254)          (120,252)
     Proceeds from sale of investments                                                    68,761            120,036
     Notes receivable                                                                       (623)                --
     Acquisition of property and equipment                                                (3,178)            (1,971)
     Proceeds from sale of property and equipment                                             81                 25
                                                                                        --------           --------
                Net cash provided by (used in) investing activities                       57,325             (2,162)

CASH FLOWS FROM FINANCING ACTIVITIES:
      Payments on long-term debt                                                            (973)                --
                                                                                        --------           --------
                Net cash used in financing activities                                       (973)                --
                                                                                        --------           --------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                                 (4,674)           (12,591)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                           6,773             27,765
                                                                                        --------           --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                              $  2,099           $ 15,174
                                                                                        ========           ========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
     Cash paid during the period for:
          Income taxes                                                                  $    278           $      1
                                                                                        ========           ========
          Interest                                                                      $     --           $     --
                                                                                        ========           ========
     Cash received during the period from income tax refund                             $  9,392           $     --
                                                                                        ========           ========
</TABLE>

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES--During
2003, the Company received property, equipment, and/or services of approximately
$616 in exchange for sponsorship privileges to the providers. Also, during 2003,
the Company issued a promissory note of $722 in connection with the purchase of
Raceworks, LLC.

See accompanying notes to consolidated financial statements.

                                       6

<PAGE>

                      CHAMPIONSHIP AUTO RACING TEAMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         BASIS OF PRESENTATION. The accompanying unaudited consolidated
financial statements have been prepared by management and, in the opinion of
management, contain all adjustments, consisting of normal recurring adjustments,
necessary to present fairly the financial position of Championship Auto Racing
Teams, Inc. and subsidiaries (the "Company") as of September 30, 2003, the
results of its operations for the three and nine months ended September 30, 2003
and 2002, and its cash flows for the nine months ended September 30, 2003 and
2002.

         In light of the significant near term financial challenges facing the
Company, we retained the investment banking firm of Bear Stearns & Co. Inc. to
assist us in exploring financing and other strategic alternatives that may be
available to us. On August 18, 2003, the Company announced it had received a
proposal from Open Wheel Racing Series, LLC ("Open Wheel") and was engaged in
negotiations regarding a possible transaction with Open Wheel. Subsequently, on
September 10, 2003, the Company and Open Wheel announced that they had signed a
definitive merger agreement providing for Open Wheel to acquire the Company for
cash equivalent to $0.56 per share, based on the number of shares of Company
common stock then outstanding (which we will not take any action to increase
while the proposed transaction is pending). The merger is subject to adoption by
the Company's stockholders. If the merger is adopted by our stockholders, we
currently expect to complete the proposed transaction with Open Wheel late in
the fourth quarter of 2003, as quickly as possible after the special meeting of
the Company's stockholders and after all of the conditions to the merger are
satisfied or waived. We intend to manage our cash on hand such that we will
continue our operations until such time as we hold a special meeting of the
stockholders to consider adoption of the merger agreement. We anticipate that we
will defer certain of our accounts payable longer than we have in the past.
Unanticipated events, delays in collecting our accounts receivable, or other
factors could result in an inability to fund all of our obligations with cash
reserves.

         If the proposed merger with Open Wheel is not completed for any reason,
and if no strategic transaction that is an alternative to the merger is
available to us at that time, it is expected that we will be required
immediately to cease our operations, wind up our affairs and seek to liquidate
our remaining assets because our cash resources and other sources of liquidity
would be substantially depleted by that time. In that event, we expect that
CART, Inc. and our other subsidiaries would discontinue racing and other
operations and commence liquidation. Although the definitive merger agreement
permits our board of directors to consider proposals for a competing transaction
and accept a superior proposal, no such competing proposal is currently being
considered by us as an alternative to the proposed transaction with Open Wheel
and no superior proposal is available.

         The unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements included in the
Company's Form 10-K for the year ended December 31, 2002, filed with the
Securities and Exchange Commission.

         Because of the seasonal concentration of racing events, the results of
operations for the three and nine months ended September 30, 2003 and 2002 are
not indicative of the results to be expected for the year.

                                       7

<PAGE>

         PRINCIPLES OF CONSOLIDATION. The consolidated financial statements of
the Company include the financial statements of Championship Auto Racing Teams,
Inc. and its wholly-owned subsidiaries - CART, Inc. ("CART"), Pro-Motion Agency,
Ltd. and CART Licensed Products, Inc. As of March 7, 2003, the consolidated
financial statements also include the financial statements of Raceworks, LLC, a
wholly owned subsidiary (See Note 8). All significant intercompany balances have
been eliminated in consolidation.

         BASIC AND DILUTED LOSS PER SHARE. Diluted per share amounts assume the
exercise of shares issuable under certain stock option plans when dilutive. Due
to losses from operations, approximately 0 and 2,127 shares for the three month
periods ended September 30, 2003 and 2002, respectively, and 0 and 9,765 shares
for the nine month periods ended September 30, 2003 and 2002, respectively, were
excluded from the dilutive loss per share calculation due to their anti-dilutive
effect.

         ACCOUNTING PRONOUNCEMENTS. In April 2003, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
(SFAS) No. 149, "Amendment of Statement 133 on Derivative Instruments and
Hedging Activities." SFAS 149 amends SFAS 133 to provide clarification on the
financial accounting and reporting of derivative instruments and hedging
activities and requires that contracts with similar characteristics be accounted
for on a comparable basis. The provisions of SFAS 149 are effective for
contracts entered into or modified after June 30, 2003, and for hedging
relationships designated after June 30, 2003. The Company adopted this statement
on July 1, 2003 and there was no impact on the financial statements upon
adoption.

         In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity." SFAS
150 establishes standards on the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. The
provisions of SFAS 150 are effective for financial instruments entered into or
modified after May 31, 2003 and to all other instruments that exist as of the
beginning of the first interim financial reporting period beginning after June
15, 2003. The Company adopted this statement on July 1, 2003 and there was no
impact on the financial statements upon adoption.

         In January 2003, the FASB issued FASB Interpretation No. 46 ("FIN 46")
"Consolidation of Variable Interest Entity." The term "variable interest" is
defined in FIN 46 as "contractual, ownership or other pecuniary interests in an
entity that change with changes in the entity's net asset value." Variable
interests are investments or other interests that will absorb a portion of an
entity's expected losses if they occur or receive portions of the entity's
expected residual returns if they occur. The Company does not expect the
recognition provisions of FIN 46 to have a material impact on the Company's
financial position or results of operations.

         On July 30, 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." The statement addresses financial
accounting and reporting for costs associated with exit or disposal activities
and nullifies Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." SFAS 146 is
effective for exit or disposal activities that are initiated after December 31,
2002. The Company adopted this statement on January 1, 2003, and there was no
impact on the financial statements upon adoption.

         In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN
45"), "Guarantor's Accounting and Disclosure Requirements for Guarantee
Including Indirect Guarantees of Indebtedness of Others." FIN 45 requires that
upon issuance of certain guarantees, a guarantor must recognize a liability for
the fair value of the obligation assumed under the guarantee. FIN 45 also
requires additional disclosures by a guarantor in its interim and annual
financial statements regarding certain guarantees and

                                       8

<PAGE>

product warranties. The recognition provisions of FIN 45 will be effective for
guarantees issued or modified after December 31, 2002. The Company adopted this
interpretation on January 1, 2003, and there was no impact on the financial
statements upon adoption.

         On December 31, 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure." This statement amends SFAS
No. 123, "Accounting for Stock-Based Compensation," to provide alternative
methods of transition for a voluntary change to the fair value based methods of
accounting for stock-based employee compensation. In addition, this statement
amends the disclosure requirements of SFAS 123 to require prominent disclosures
in both annual and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the method used on
reported results.

         As permitted by SFAS No. 123, the Company has chosen to follow
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APB No. 25") in accounting for its stock options granted to
employees and directors. Under APB No. 25, the Company does not recognize
compensation expense on the issuance of its stock options because the option
terms are fixed, and the exercise price equals the market price of the
underlying stock on the grant date.

         However, as required by SFAS No. 123, companies who have chosen to
follow APB No. 25 are required to calculate pro forma information as if it had
calculated compensation based on the fair value at the grant date for its stock
options granted to employees and directors. In the third quarters of 2003 and
2002, there was no compensation expense under APB No. 25.

<TABLE>
<CAPTION>
                                                                                 (In Thousands)
                                                               Three Months Ended           Nine Months Ended
                                                                  September 30,               September 30,
                                                                2003          2002         2003          2002
                                                             ----------    ---------    ---------     ---------
<S>                                                          <C>           <C>          <C>           <C>
NET LOSS

As reported                                                  $  (34,404)   $  (8,310)   $  (77,907)   $  (13,530)
Total stock-based employee compensation expense determined
    under the fair value based method, net of tax                  (503)        (375)       (1,644)         (953)
                                                             ----------    ---------    ----------    ----------
Pro forma                                                    $  (34,907)   $  (8,685)   $  (79,551)   $  (14,483)
                                                             ==========    =========    ==========    ==========
DILUTED LOSS PER SHARE

As reported                                                  $    (2.34)   $   (0.56)   $    (5.29)   $    (0.92)
Total stock-based employee compensation expense determined
    under the fair value based method, net of tax                 (0.03)       (0.03)        (0.11)        (0.06)
                                                             ----------    ---------    ----------    ----------
Pro forma                                                    $    (2.37)   $   (0.59)   $    (5.40)   $    (0.98)
                                                             ==========    =========    ==========    ==========
</TABLE>

         RECLASSIFICATIONS. Certain reclassifications have been made to the 2002
unaudited consolidated financial statements in order for them to conform to the
2003 presentation.

         MANAGEMENT ESTIMATES. The preparation of financial statements in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period presented. The actual
outcome of the estimates could differ from the estimates made in the preparation
of the consolidated financial statements.

                                       9

<PAGE>

2. GOODWILL AND INTANGIBLE ASSETS

         In June 2001, the FASB issued SFAS No. 142, "Goodwill and Intangible
Assets." The statement requires companies to stop amortizing goodwill and
certain intangible assets with indefinite useful lives. Instead, goodwill and
intangible assets with indefinite useful lives are tested for impairment upon
adoption of the statement and annually thereafter. As a result of adoption, the
Company no longer records amortization expense related to goodwill or intangible
assets with indefinite useful lives.

         The Company adopted SFAS No. 142, effective January 1, 2002, which
resulted in a non-cash charge of $1.5 million, or $956,000 net of tax benefit of
$514,000, to write-off the value of its goodwill. The goodwill was recorded
under the purchase method of accounting for the purchases of Pro-Motion Agency,
Inc. and CART Licensed Products, LP, on April 10, 1998 and January 1, 1999,
respectively. Such charge is reflected as a cumulative effect of an accounting
change in the accompanying consolidated statements of operations. Prior to the
adoption of SFAS No. 142, the Company had accounted for its goodwill and
intangible assets in accordance with the accounting standards existing at the
time.

         Under SFAS No. 142, goodwill impairment is deemed to exist if the
carrying value of a reporting unit exceeds its estimated fair value. The
Company's reporting units are generally consistent with the operating segments
identified in Note 6 - Segment Reporting. Raceworks, LLC, a wholly-owned
subsidiary included in the race promotions segment, is also a reporting unit.
The Company recorded goodwill in conjunction with the purchase described in Note
8 - Acquisition of Raceworks, LLC. In calculating the impairment charge, the
fair values of the reporting units were estimated using a discounted cash flow
methodology.

         Operating results and cash flows of Raceworks, LLC were significantly
lower than expected during the quarter ended September 30, 2003 as a result of
the event promoted by Raceworks, LLC in September in Miami. Based on those
results and other qualitative information, the future earnings forecasts were
revised. As a result of management's analysis, the Company recognized a non-cash
asset impairment charge of $1,262,000 to write-off goodwill and other intangible
assets related to the purchase of Raceworks, LLC. The fair value of the
reporting unit was estimated using the present value of expected future cash
flows.

3. SHORT-TERM INVESTMENTS

         The following is a summary of the estimated fair value of
available-for-sale short-term investments by balance sheet classification:

<TABLE>
<CAPTION>
                                                          GROSS UNREALIZED
                                                          ----------------
(IN THOUSANDS)                  COST      FAIR VALUE      GAIN       LOSS
                               -------    ----------     -------     -----
<S>                            <C>        <C>            <C>         <C>
SEPTEMBER 30, 2003
U.S. agencies securities       $17,387      $17,551      $   164     $  --
                               -------      -------      -------     -----
Total short-term investments   $17,387      $17,551      $   164     $  --
                               =======      =======      =======     =====

DECEMBER 31, 2002
Letters of credit              $    30      $    30      $    --     $  --
Corporate bonds                  2,538        2,556           18        --
U.S. agencies securities        76,003       76,903          900         2
                               -------      -------      -------     -----
Total short-term investments   $78,571      $79,489      $   918     $   2
                               =======      =======      =======     =====
</TABLE>

         Net proceeds from sales of investments for the nine months ended
September 30, 2003 and 2002 were approximately $68.8 million and $0,
respectively.

         Contractual maturities range from less than one year to two years. The
weighted average maturity of the portfolio does not exceed one year.

                                       10

<PAGE>

4. PROPERTY AND EQUIPMENT

         Property and equipment consisted of the following at September 30, 2003
and December 31, 2002:

<TABLE>
<CAPTION>
                                             (IN THOUSANDS)
                                        SEPTEMBER 30,   DECEMBER 31,                USEFUL LIFE
                                             2003           2002                     (IN YEARS)
                                         ------------   ------------   ----------------------------------
<S>                                      <C>            <C>            <C>
Engines                                  $  4,300       $  4,000        2
Equipment                                  11,107          7,242        5-20
Furniture and fixtures                        623            425        10
Vehicles                                    4,158          4,065        5-7
Other                                         270            268        5 (except leasehold improvements)
                                         --------       --------
Total                                      20,458         16,000

Less accumulated depreciation              (8,611)        (5,597)
                                         --------       --------
Property and equipment (net)             $ 11,847       $ 10,403
                                         ========       ========
</TABLE>

         The Company periodically reviews the carrying value of its long-lived
assets held and used, other than goodwill and intangible assets with indefinite
lives, and assets to be disposed of when events and circumstances warrant such a
review. If the carrying value of a long-lived asset is considered impaired, an
impairment charge is recorded for the amount by which the carrying value of the
long-lived asset exceeds its fair value.

         Operating results and cash flows of Raceworks, LLC were significantly
lower than expected during the quarter ended September 30, 2003. Based on those
results and other qualitative information, the future earnings forecasts were
revised. As a result of management's analysis, the Company recognized a non-cash
asset impairment charge of $2,038,000 to reduce the carrying value of the
property and equipment of Raceworks, LLC. In the absence of quoted market
prices, the fair values of the property and equipment were determined using
estimates of amounts at which the assets could be sold to third parties in
current transactions, less any sale costs.

5. NOTES RECEIVABLE

         In May 2003, the Company entered into an agreement with a third party
where we paid for the costs of capital improvements retained by the third party
necessary to stage an event where we are the promoter. We accepted an unsecured
note of $750,000 for said improvements, to be received, without interest over
five years. Payment in the amount of $75,000 will be due in each of the first
four years with a final payment of $450,000 due in the fifth year. These
payments are payable each November 1st, beginning in 2003. The Company imputed
interest on the note at a rate of 6% and recorded a discount on the note
receivable which reduced the note by $146,000.

         In June 2003, the Company entered into an amendment to a sanction
agreement with a promoter where we accepted a note in the amount of $400,000 as
payment for a portion of the sanction fee. This note is payable in 36 equal
monthly installments, bearing interest at 10% per annum, beginning January 1,
2004. The note is collateralized by all products and proceeds of all other
events staged by the promoter at the promoter's facility.

                                       11

<PAGE>

6. SEGMENT REPORTING

         The Company has two reportable segments, sanctioning and race
promotions. In 2003, the Company added "Race Promotions" as a reportable
segment. There were no prior period adjustments relating to the new reportable
segment.

         Sanctioning encompasses all the business operations of organizing,
marketing and staging all of our open-wheel racing events when we act as a
sanctioning body as well as corporate expenses. We receive a sanction fee from
the event promoter for our services that is either fixed or is based upon a
profit sharing agreement. Sanction fees revenue, sponsorship revenue, television
revenue, engine lease revenue, race distributions and race expenses, television
expenses and administrative and indirect expenses are recognized in the
sanctioning segment.

         Race promotions encompasses all the business operations of marketing
and promoting our open-wheel racing events when we act as promoter and have
exclusive rights to the event. We receive the revenues from the event and are
responsible for the expenses of the event.

         The accounting policies of the segments are the same as those described
in the summary of significant accounting policies. The Company's long-lived
assets are substantially used in the sanctioning segment in the United States.
The Company evaluates performance based on income before income taxes.

<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED SEPTEMBER 30,
                                                        --------------------------------
($ in thousands)                             SANCTIONING  RACE PROMOTIONS     OTHER*          TOTAL
                                             -----------  ---------------    --------       --------
<S>                                          <C>          <C>               <C>            <C>
2003
Revenues                                      $ 12,502    $  5,607          $     61       $ 18,170
Interest income (net)                              246          --                 2            248
Depreciation and amortization                      991          --                 7            998
Segment income (loss) before income taxes      (26,845)    ( 7,566)                7        (34,404)

2002
Revenues                                      $ 18,495    $     --          $     42       $ 18,537
Interest income (net)                              879          --                 3            882
Depreciation and amortization                      339          --                18            357
Segment loss before income taxes                (8,203)     (5,452)              (12)       (13,667)
</TABLE>

<TABLE>
<CAPTION>
                                                         NINE MONTHS ENDED SEPTEMBER 30,
                                                         -------------------------------
($ in thousands)                               SANCTIONING   RACE PROMOTIONS     OTHER*      TOTAL
                                               -----------   ---------------    --------    --------
<S>                                            <C>           <C>                <C>         <C>
2003
Revenues                                        $ 27,847        $ 10,628        $    267    $ 38,742
Interest income (net)                              1,113              --               8       1,121
Depreciation and amortization                      2,798              --              44       2,842
Segment income (loss) before income taxes        (63,905)        (13,455)            113     (77,247)

2002
Revenues                                        $ 41,894        $  1,417        $    122    $ 43,433
Interest income (net)                              3,073              --              10       3,083
Depreciation and amortization                        989              --              56       1,045
Segment loss before income taxes and
   cumulative effect of accounting change        (11,789)         (7,518)            (36)    (19,343)
</TABLE>

*Amounts are below the quantitative thresholds for presentation as a reportable
segment. These amounts are related to the Company's licensing royalties.

                                       12
<PAGE>

Reconciliations to consolidated financial statement totals are as follows:

<TABLE>
<CAPTION>
                                               SEPTEMBER 30,         DECEMBER 31,
($ in thousands)                                   2003                  2002
----------------                               -------------         ------------
<S>                                            <C>                   <C>
Total assets for sanctioning segment              $38,035              $114,194
Total assets for race promotion segment             4,915                    --
Other assets                                          703                   257
                                                  -------              --------

Total consolidated assets                         $43,653              $114,451
                                                  =======              ========
</TABLE>

         As a result of the Company's adoption of SFAS No. 142, the sanctioning
segment recorded a non-cash charge of $632,000, or $411,000 net of tax benefit
of $221,000, and the Other segment recorded a non-cash charge of $838,000, or
$545,000 net of tax benefit of $293,000, as a cumulative effect of accounting
change for the write-off of goodwill effective in the first quarter of 2002.

         Operating results and cash flows of the race promotions segment were
significantly lower than expected during the quarter ended September 30, 2003.
Based on those results and other qualitative information, the future earnings
forecasts were revised. The Company recognized a non-cash asset impairment
charge of $1,262,000 to write-off goodwill and other intangible assets of the
race promotions segment. The fair value of the reporting unit was estimated
using the present value of expected future cash flows. The Company also
recognized a non-cash asset impairment charge of $2,038,000 to reduce the
carrying value of the property and equipment of the race promotions segment. In
the absence of quoted market prices, the fair values of the property and
equipment were determined using estimates of amounts at which the assets could
be sold to third parties in current transactions, less any sale costs.

7. COMMITMENTS AND CONTINGENCIES

         LITIGATION. On September 8, 2000, a complaint for damages was filed
against the Company in the Superior Court of the State of California, County of
Monterey. This lawsuit was filed by the heirs of Gonzolo Rodriguez, a race car
driver who died on September 11, 1999 while driving his race car at the Laguna
Seca Raceway in a practice session for the CART race event. The suit sought
damages in an unspecified amount for negligence and wrongful death. On November
5, 2001, the Court upheld a release signed by Mr. Rodriguez and the causes of
action for negligence were dismissed. On March 13, 2003 a jury verdict found in
favor of the Company with respect to the claim for willful and/or reckless
conduct and the case was dismissed. An appeal has been filed.

         On October 30, 2000, a complaint for damages was filed against the
Company in the Superior Court of the State of California, County of San
Bernardino. This lawsuit was filed by the estate of Greg Moore, a race car
driver who died on October 31, 1999 while driving his race car at the California
Speedway during the CART race event. The suit sought actual and punitive damages
from the Company in an unspecified amount for breach of duty, wanton and
reckless misconduct, breach of implied contract, battery, wrongful death and
negligent infliction of emotional distress. On a motion for Summary Judgment,
the complaint was dismissed on all counts on October 16, 2002. An appeal of the
dismissal was filed on November 25, 2002.

         On November 8, 2001, two former team owners, DellaPenna Motorsports and
Precision Preparation, Inc., filed suit against the Company in the Circuit Court
for the County of Wayne, State of Michigan, each alleging damages in excess of
$1.0 million for breach of contract, promissory estoppel,

                                       13

<PAGE>

misrepresentation, and tortious interference with contract and business
expectancy. The claim was settled for $400,000 in May 2003.

         On January 29, 2002, a demand for arbitration was filed against the
Company with the American Arbitration Association by Action Performance
Companies, Inc. The arbitration demand was filed in regard to a retail licensing
agreement entered into on November 16, 1998 and subsequent amendments to the
original agreement. The claim sought damages of $3.2 million for breach of
contract, breach of implied good faith and fair dealing and fraud and punitive
damages of $3.2 million. The Company filed a counterclaim against Action
Performance Companies, Inc. The arbitration panel determined that Action
Performance Companies, Inc. failed to prove its claim for breach of implied good
faith and fair dealing or fraud, but did find that the Company had breached the
contract and awarded Action Performance Companies, Inc. the amount of $931,588
in August 2003 for its net unrecoverable expenses and interest. The Company paid
the award in September 2003.

         On March 26, 2002, the Company filed a complaint against Joseph F.
Heitzler, a former director and former chairman, chief executive officer and
president of the Company in U.S. District Court, Eastern District of Michigan,
Southern Division. The complaint alleged that Mr. Heitzler breached his
employment contract, breached his fiduciary duties and intentionally or
recklessly omitted to disclose information to the Company in order to induce the
continuation of Mr. Heitzler's employment agreement. The suit sought damages of
an unspecified amount. On March 28, 2002, Mr. Heitzler filed a complaint against
the Company in the Superior Court of the State of California, County of Los
Angeles. The suit sought compensatory, exemplary and punitive damages in excess
of $2.0 million for breach of contract, fraud, negligent misrepresentation,
breach of covenant of good faith and fair dealing and declaratory relief. An
amended complaint adding a count for tortious breach of contract in violation of
public policy was filed on April 9, 2002. These claims were settled in August
2003 and the Company paid $1.7 million in settlement of any and all claims.

         On July 9, 2002, a Demand for Arbitration was filed against the Company
with the American Arbitration Association in Indianapolis, Indiana by Engine
Developments Ltd. The Demand alleged that the Company breached an agreement to
purchase engines and sought unspecified damages. This claim was settled July 29,
2003 and the Company paid $1.75 million in settlement of any and all claims.

         In June 2003, the Company received $1.0 million from proceeds received
from a bankruptcy settlement regarding claims filed against Eurospeedway Lausitz
for loss of sanction fees and other damages that occurred when the 2002 event
was cancelled as a result of the bankruptcy of the promoter. These proceeds have
been recorded in the quarter ended June 30, 2003 as a reduction of litigation
expense.

         As we have previously reported, we are party to several lawsuits. We
cannot predict the outcome of the litigation, and at this time, management is
unable to estimate the impact that ultimate resolution of these matters may have
on our financial position or future results of operations.

8. ACQUISITION OF RACEWORKS, LLC

         On March 7, 2003, the Company acquired one hundred percent (100%) of
the membership interests in Raceworks, LLC ("Raceworks"). The results of
Raceworks' operations have been included in the consolidated financial
statements since that date. Raceworks is a motorsports promotion company and
holds a revocable license agreement to annually conduct a street race in
downtown Miami through 2017, with an option to extend for an additional ten (10)
years. The aggregate purchase price was $1.2 million including $473,000 of cash
and a promissory note of $722,000. Commencing on the payment due dates, any
unpaid principal bears at ten percent (10%) per annum. During the quarter ended
September 30,

                                       14

<PAGE>

2003, the Company was in default of certain payment provisions of the promissory
note and the promissory note became due and payable and has been classified as
current.

         The following table summarizes the estimated fair values of the assets
acquired and liabilities assumed as part of the acquisition.

<TABLE>
<S>                                          <C>
Current assets                               $   449,000
Property and equipment                         4,120,000
Other assets                                      36,000
Intangible assets including goodwill           1,262,000
                                             -----------
         Total assets acquired                 5,867,000
                                             -----------
Current liabilities                           (1,916,000)
Long-term debt                                (2,778,000)
                                             -----------
         Total liabilities assumed            (4,694,000)
                                             -----------
Net assets acquired                          $ 1,173,000
                                             ===========
</TABLE>

         The acquisition has been accounted for using the purchase method of
accounting. Under purchase accounting, the total purchase price has been
allocated to the tangible and intangible assets and liabilities of Raceworks
based upon their respective fair values as of the date of the acquisition. An
allocation of the purchase price has been made to major categories of assets and
liabilities based on available information.

         Operating results and cash flows of Raceworks, LLC were significantly
lower than expected during the quarter ended September 30, 2003, which we
considered to be an indication of impairment. Based on those results and other
qualitative information, the future earnings forecasts were revised and the fair
value determined. The Company recognized a non-cash asset impairment charge of
$1,262,000 to write-off goodwill and other intangible assets related to the
purchase of Raceworks, LLC. The fair value of the reporting unit was estimated
using the present value of expected future cash flows.

         The Company reviewed the carrying value of the long-lived assets of
Raceworks at September 30, 2003, using estimated cash flows. The carrying values
of the long-lived assets were considered impaired. In the absence of quoted
market prices, the fair values of the long-lived assets were determined using
estimates of amounts at which the assets could be sold to third parties in
current transactions, less any sale costs. The Company recognized a non-cash
asset impairment charge of $2,038,000 for the period ended September 30, 2003 to
reduce the carrying value of the property and equipment of Raceworks, LLC.

         The following unaudited pro forma financial data illustrates the
estimated effects as if the acquisition had been completed as of the beginning
of the periods.

<TABLE>
<CAPTION>
                                                            (In Thousands, Except Per Share Amounts)
                                                                        Nine Months Ended
                                                            September 30, 2003     September 30, 2002
                                                            ------------------     ------------------
<S>                                                         <C>                    <C>
Revenues                                                        $  38,749              $  43,433
Loss before income taxes and cumulative effect
   of accounting change                                         $ (77,490)             $ (19,667)
Net loss                                                        $ (78,150)             $ (13,854)

Basic and diluted loss per share:
   Loss before income taxes and cumulative effect
      of accounting change                                      $   (5.26)             $   (1.34)
   Net loss                                                     $   (5.31)             $   (0.94)
</TABLE>

                                       15

<PAGE>

         The pro forma results are not necessarily indicative of the actual
results if the transactions had been in effect for the entire period presented.
In addition, they are not intended to be a projection of future results and do
not reflect, among other things, any synergies that might have been achieved
from combined operations.

9. LONG TERM DEBT

         In July 2002, the Company guaranteed a $1.8 million commercial term
loan in connection with the operations of Raceworks, LLC. The Company
subsequently acquired this loan in conjunction with the acquisition of
Raceworks, LLC and has recorded the loan in its long-term debt as of September
30, 2003. The principal on the loan shall be paid quarterly, commencing on
October 31, 2003 and on the last day of each January, April, July and October
thereafter, in the amount of $50,000 per quarter. The entire unpaid principal
amount of the loan and all accrued and unpaid interest and other amounts payable
thereunder shall be due and payable in July 2007. The loan may be prepaid, in
whole or in part, without a penalty. The rate of interest on the outstanding
principal amount of the loan will be equal to The Wall Street Journal prime rate
(the "prime rate") plus 150 basis points. (As of September 30, 2003, the rate of
interest was 5.5 %.)

         At June 30, 2003 and September 30, 2003, the Company was in default of
certain financial covenants for which a waiver will be requested. These
financial covenants require that total stockholders' equity of the Company not
be below $75 million. As a result, the entire amount of the note has been
classified as current.

         On March 7, 2003, the Company issued a promissory note of $722,000 in
conjunction with the acquisition of Raceworks, LLC. Commencing on the payment
due dates, any unpaid principal bears interest at ten percent (10%) per annum.
The Company is in default of certain payment provisions of the note. As a
result, the entire amount of the note has been classified as current at
September 30, 2003.

10. DEFERRED TAXES

         SFAS No. 109 requires that net deferred tax assets be reduced by a
valuation allowance if, based on the weight of available evidence, it is more
likely than not that some portion or all of the net deferred tax asset will not
be realized. The Company has tax assets from U.S. net operating loss
carryforwards, foreign tax credit carryforwards and future tax deductions of
$28.1 million, $278,000 and $1.2 million, respectively. The carryforward items
expire over the next 5 to 20 years. Failure to achieve taxable income within the
carryforward period would affect the ultimate realization of the net deferred
tax assets. Management believes there is sufficient uncertainty regarding the
future generation of taxable income. Because it is more likely than not that
deferred tax assets will not be realized, the tax benefit for current year
losses and net deferred tax assets recorded at December 31, 2002 has been
reduced by a $29.6 million valuation allowance at September 30, 2003. As a
result, income tax expense was $660,000 for the nine month period ended
September 30, 2003.

11. SUBSEQUENT EVENT

     On October 29, 2003, the Champ Car World Series race event in Fontana,
California scheduled for November 2, 2003, was canceled by the promoter due to
catastrophic forest fires in the surrounding region. The financial effect on the
operations of the Company cannot be determined at this time.

                                       16

<PAGE>

ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

CRITICAL ACCOUNTING POLICIES

Use of Estimates

         The following discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods.

         Significant accounting estimates include the allowance for doubtful
accounts for trade accounts receivable, impairment of fixed assets and deferred
race expenses, the recoverability of intangible assets and goodwill, income
taxes and related valuation allowances, certain accrued liabilities and fair
values allocated to assets acquired and liabilities assumed in business
combinations.

         We believe that the estimates, assumptions and judgments involved in
the accounting policies described below have a material impact on our financial
statements. These areas are subject to the risks and uncertainties we describe
in this report. Actual results, therefore, could differ from those estimated.

Revenue Recognition

         One of our most critical accounting policies is revenue recognition. We
recognize our revenues as they are earned, but the determination of when they
are earned depends on the source of the revenue. Our policy for each revenue
source is outlined below.

         SANCTION FEE REVENUE. Generally, sanction fees are paid in advance of
the race and are recorded as deferred revenue. Revenue from sanction fees is not
recognized until the event is completed. In 2002 and 2003, we entered into
agreements with certain promoters where all or a portion of the contracted
sanction fee was reduced in exchange for a percentage of the profits from the
event. The sanction fee received and our share of any profits from these events
is recognized as sanction fee revenue when the event is completed.

         SPONSORSHIP REVENUE. Revenue is recorded ratably over the life of the
sponsorship agreement. On occasion, revenue is recorded at the time of the race
if the sponsorship pertains to that race. Generally, sponsorship agreements call
for quarterly payments, and each payment is recorded as deferred revenue when
received. Included in sponsorship revenue is revenue generated through barter
transactions. We recognize this revenue at the value of the consideration given
or the consideration received, whichever is more clearly determinable.

         ENGINE LEASE REVENUE. In 2002, we purchased the engines that will be
used for the 2003 and 2004 Champ Car World Series race seasons. Each team is
required to use these engines in order to compete in the series. We will lease
the engines to the teams for $100,000 per car per year. The revenue is realized
ratably over the life of the agreement.

         TELEVISION REVENUE. We receive television revenue in the form of rights
fees and advertising sales. Revenue is not recognized until earned which is when
the show airs. Television revenue arising from minimum guarantees and rights
fees is recognized ratably over the race schedule. Advertising sales relate

                                       17

<PAGE>

to specific shows and is recognized when the show and advertisements air.
Payments related to television revenue that are received prior to when earned
are recorded as deferred revenue until earned.

         RACE PROMOTION REVENUE. Race promotion revenue consists of all
commercial rights such as ticket sales, event sponsorship, hospitality and all
other revenues related to promoting an event. Payments received prior to the
event are recorded as deferred revenue. Revenue is recorded when the event is
completed.

         OTHER REVENUES. Other revenues include membership and entry fees,
contingency awards money, royalty income and other miscellaneous revenues.
Membership and entry fees and contingency award money are recognized ratably
over the race schedule. Royalty income is recognized as the related product
sales occur or on a monthly basis based on a minimum guarantee.

Expense recognition

         RACE PROMOTION EXPENSES. General and administrative expenses related to
races we promote are recognized when incurred. Expenses directly related to the
event are recognized when the event occurs. Prepaid expenses are charged to
operating results when the event occurs or when the assets are determined to not
be recoverable.

Goodwill and Intangible Asset Impairment

         We adopted FASB Statement of Financial Accounting Standards (SFAS) No.
142, "Goodwill and Intangible Assets," effective January 1, 2002. The statement
requires companies to stop amortizing goodwill and certain intangible assets
with indefinite useful lives. The statement also requires that we test our
goodwill and intangible assets with indefinite useful lives for impairment upon
adoption of the statement and annually thereafter. Our goodwill was associated
with our acquisitions of Pro-Motion Agency, Inc. and CART Licensed Products, LP,
on April 10, 1998 and January 1, 1999, respectively. Upon adoption of the
statement, we recorded a one-time, non-cash charge of $1.5 million, or $956,000
net of tax benefit of $514,000, to write-off the value of our goodwill. The
write-off of goodwill results from the use of discounted cash flows in
assessment of fair value for each reporting unit as required by SFAS No. 142.
Under SFAS No. 142, goodwill impairment is deemed to exist if the carrying value
of a reporting unit exceeds its estimated fair value.

         During the quarter ended March 31, 2003, the Company recorded
intangible assets, including goodwill, of $562,000 relative to the purchase of
Raceworks, LLC. During the quarter ended September 30, 2003, the Company
recorded an additional $723,000 of intangible assets relative to the purchase.
Operating results and cash flows of Raceworks, LLC were significantly lower than
expected during the quarter ended September 30, 2003. Based on those results and
other qualitative information, the future earnings forecasts were revised. As a
result of management's analysis, the Company recognized a non-cash asset
impairment charge of $1,262,000 to write-off goodwill and other intangible
assets related to the purchase of Raceworks, LLC. The fair value of the
reporting unit was estimated using the present value of expected future cash
flows.

Impairment of Long-Lived Assets

         The Company periodically reviews the carrying value of its long-lived
assets held and used, other than goodwill and intangible assets with indefinite
lives, and assets to be disposed of when events and circumstances warrant such a
review. If the carrying value of a long-lived asset is considered impaired, an
impairment charge is recorded for the amount by which the carrying value of the
long-lived asset exceeds its fair value.

                                       18

<PAGE>

         Operating results and cash flows of Raceworks, LLC were significantly
lower than expected during the quarter ended September 30, 2003. Based on those
results and other qualitative information, the future earnings forecasts were
revised. As a result of management's analysis, the Company recognized a non-cash
asset impairment charge of $2,038,000 to reduce the carrying value of the
property and equipment of Raceworks, LLC. In the absence of quoted market
prices, the fair values of the property and equipment were determined using
estimates of amounts at which the assets could be sold to third parties in
current transactions, less any sale costs.

Litigation

         We are involved in litigation as a part of our normal course of
business. Our litigation proceedings are included in our most recent Form 10-K,
Item 3: Legal Proceedings and updated, as needed, in Part II-Other Information,
Item 1: Legal Proceedings in this and subsequent Form 10-Qs. When a complaint is
filed by or against us that represents a material claim, we disclose the
proceeding in our financial statements. When a claim against us is probable and
reasonably estimable, we record the expense. When we are the party filing the
claim, we do not record income until any damages from the claim are assured.

REVENUES

         We derive revenues primarily from (i) sanction fees, (ii) sponsorship,
(iii) television rights, (iv) race promotion, (v) engine leases and (vi) other
revenue. Following is an explanation of our individual revenue items:

         SANCTION FEES. We receive sanction fees from the promoters of our races
(other than races we promote). The fees are based on contracts between the
promoters and CART. We have entered into agreements with certain promoters of
the Champ Car World Series for a reduction in the previously contracted sanction
fees. In return, we will receive a share of the net income from the event. The
percentage of net income, if any, will also be included in sanction fees.
Therefore, there is less visibility and less predictability for CART's earnings
than in the previous financial model as CART's revenues will be affected by the
success of these races.

         SPONSORSHIP REVENUE. We receive corporate sponsorship revenue based on
negotiated contracts. An official corporate sponsor receives status and
recognition rights, event rights and/or product category exclusivity.

         We have developed an Entrant Support Program for the 2003 Champ Car
World Series. The new program is part of an enhanced incentive program we
developed with our teams, whereby we provide financial support to new and
existing teams to run in the Champ Car World Series and, in exchange, each team
will provide logo space on its cars for Champ Car-designated sponsors to
advertise. Sponsorship fees, if any, paid by these corporate sponsors will be
retained by us to offset the financial support we are providing to the teams.
The program will also combine Champ Car World Series event and team sponsorship
opportunities, along with advertising on television and in print media. None of
these sponsorship packages were sold during the first nine months of 2003.

         TELEVISION REVENUE. In 2003, we have contracts for our domestic
television rights with CBS and Speed Channel. We have broadcast seven races on
CBS and will broadcast eleven on Speed Channel of which eight have aired as of
September 30, 2003. One of our races was broadcast on HD Net TV where HD Net TV
provided the air time and we shared the cost of production. We bought the
air-time and paid for production for the CBS races. Speed Channel will provide
the air-time for the races aired on its network, including Champ Car practice
and qualifying and a half-hour pre-race show. We will pay for production for

                                       19

<PAGE>

the races to be broadcast on the Speed Channel network. We receive the
advertising inventory for all shows aired on all networks and we are responsible
for selling the advertising.

         In 2003, we have international television rights with:

         -    Gold Coast Motor Events Co. (Australia)

         -    Molstar (Canada)

         -    Promotion Entertainment of Mexico, LLC (Mexico)

         -    Octagon CSI (all others)

         A rights fee will be paid to us by each international broadcast partner
for rights to air the Champ Car race either live, time-delayed or as a highlight
package, in the country where they hold our rights. See "Other Related Party
Transactions" for a description of our arrangements with Promotion Entertainment
of Mexico, LLC, an entity principally owned by Mr. Gerald R. Forsythe, a 23%
stockholder of the Company until September 26, 2003, when he contributed all of
his shares of our common stock to Open Wheel, and currently the beneficial owner
of a substantial membership interest in Open Wheel.

         RACE PROMOTION REVENUE. In 2003, we promoted six of our races, all of
which occurred during the first nine months of 2003. Race promotion revenue
includes all the commercial rights associated with promoting a Champ Car event,
such as admissions, event sponsorship and hospitality sales. In most cases we
partnered with experienced race promoters to promote these events and we were
responsible for selling all of the commercial rights of the event.

         ENGINE LEASE REVENUE. In 2002, we purchased the engines that will be
used for the 2003 and 2004 Champ Car World Series race seasons. Each team is
required to use these engines in order to compete in the series. We will lease
the engines to the teams for $100,000 per car per year.

         OTHER REVENUE. Other revenue includes membership and entry fees,
contingency awards money, royalties, commissions and other miscellaneous revenue
items. Membership and entry fees are payable by Toyota Atlantic Championship
competitors. In addition, we charge fees to competitors for credentials for all
team participants and driver license fees for all drivers competing in the
series. We receive royalty revenue for the use of the CART service marks and
trademarks on licensed merchandise that is sold both at tracks and at off-track
sites. We receive commission income from the sale of chassis and parts to our
support series teams.

EXPENSES

         Our expenses are incurred primarily in, (i) distributions to our race
teams: prize money, participation payments and team assistance, (ii) race
operations: expenses directly related to sanctioning the events, (iii) race
promotion: expenses related to races we promote, (iv) television: expenses
directly related to buying air time and production of our domestic and
international television programming and (v) administrative and indirect:
expenses related to administration, marketing, sales and public relations. Set
forth below is an explanation of the individual expense line items:

         RACE DISTRIBUTIONS. We pay the racing teams for their on-track
performance. Race distributions include the following for each event:

         -    event purse which is paid based on finishing position

         -    contingency award payments

         -    year-end point fund, which is paid based on year end finishing
              position

         -    participation payments

                                       20

<PAGE>

         -    entrant support payments

         -    team assistance

         We pay awards to the teams, based on their cumulative performance for
the season, out of the year-end point fund. Participation payments are being
made in 2003 to each of our entries (to a maximum of 20 cars) on a per car, per
race basis. In addition, entrant support payments are being made to
participating teams as part of a financial incentive plan to attract and retain
teams to compete in our series. The payments are made to teams in exchange for
logo advertising space on their cars. We have the opportunity to sell and retain
the revenue from the advertising. In 2003, we are providing assistance to
certain teams to ensure that there are a sufficient number of race cars
competing in our series. We will spend up to $33.0 million in team assistance,
spread out over the race season, to make sure there are a sufficient number of
viable competitors for the 2003 season. Through September 30, 2003, we have
expensed $23.9 million in team assistance. In exchange for the team assistance,
we receive certain sponsorship rights from the team.

         RACE EXPENSES. We are responsible for officiating and administering all
of our events. Costs primarily include officiating fees, travel, per diem and
lodging expenses for the following officiating groups:

         -    medical services

         -    race administration

         -    race officiating and rules compliance

         -    registration

         -    safety

         -    technical inspection

         -    timing and scoring

         RACE PROMOTION EXPENSES. In 2003, we promoted six of our own events,
all of which occurred during the first nine months of 2003. Race promotion
expenses relate to all costs associated with staging a Champ Car event,
including track rental, personnel costs and promotion of the event.

         TELEVISION EXPENSES. In 2003, we bought the air time for our seven CBS
races and a one hour preseason preview show at a cost of $3.5 million. Speed
Channel is providing the air time for the races aired on its network, including
Champ Car practice and qualifying and a half-hour pre-race show. We pay for
production costs associated with the races to be broadcast on the Speed Channel
network. One of our races was broadcast on HD Net TV which provided the air time
and we shared the production costs. We also incur expenses for our international
production for all of our races.

         ADMINISTRATIVE AND INDIRECT EXPENSES. Administrative and indirect
expenses include all operating costs not directly incurred for a specific event,
including:

         -    administration

         -    marketing and advertising

         -    sponsorship sales and service

         -    public relations

RESULTS OF OPERATIONS

Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002

         REVENUES. Total revenues for the quarter ended September 30, 2003 were
$18.2 million, compared to $18.5 million during the same period in the prior
year. The decrease was due to a decrease in sanction

                                       21

<PAGE>

fees, sponsorship revenue, television revenue and other revenue partially offset
by an increase in race promotion and engine lease revenue as described below.

         Sanction fees for the quarter ended September 30, 2003 were $7.8
million, a decrease of $4.7 million, or 38%, from the same period in the prior
year. The decrease was partially attributable to running five races that paid
sanction fees in the third quarter of 2003 compared to seven races that paid
sanction fees in the same period in the prior year. The decrease was also due to
negotiated reductions in sanction fees with certain promoters. We ran three
self-promoted races in the third quarter of 2003, compared to zero in the prior
year. Revenues from self-promoted races are reflected in race promotion revenue.

         Sponsorship revenue for the quarter ended September 30, 2003 was $2.6
million, a decrease of $311,000, or 11%, from the same period in the prior year.
This decrease was primarily attributable to the loss of sponsorship income from
our former title sponsor. The decrease was partially offset by new sponsorship
from our two presenting sponsors Bridgestone/Firestone North American Tire, LLC
and Ford Motor Company.

         Television revenue for the quarter ended September 30, 2003 was
$831,000, a decrease of $1.1 million, or 58%, from the same period in the prior
year. The decrease was primarily attributable to a reduction in rights sales for
our international television rights, and a decrease in advertising revenue from
our races broadcast on CBS, partially offset by advertising revenue from our
Speed Channel shows. In 2003, we pay for the production for all of our shows and
we receive the television advertising inventory. In 2002, Speed Channel paid for
the production of the shows aired on its network and received the advertising
inventory.

         Race promotion revenue for the quarter ended September 30, 2003 was
$5.6 million, with no corresponding revenue in the same period in the prior
year. The increase was attributable to promoting three races in Cleveland, Ohio,
Lexington, Ohio and Miami, Florida in the quarter ended September 30, 2003.

         Engine lease revenue for the quarter ended September 30, 2003 was
$475,000, with no corresponding revenue in the prior period. We purchased the
engines that will be used in our series for the 2003 and 2004 seasons. The
engines are leased to the teams for $100,000 per car per year payable in four
installments.

         Other revenue for the quarter ended September 30, 2003 was $803,000,
which was a decrease of $278,000, from the same period in the prior year. Other
revenue includes membership and entry fees, contingency awards money, royalty
income, commission on parts sales and other miscellaneous revenue. The decrease
was primarily due to a decrease in entry fees in CART due to a waiver of those
fees for 2003, fewer participants in the Toyota Atlantic series and a decrease
in merchandise sales from licensed merchandise.

         EXPENSES. Total expenses for the quarter ended September 30, 2003 were
$53.1 million, an increase of $20.9 million, or 65%, from the same period in the
prior year. This increase was due to an increase in race distributions, race
promotion expense, television expense, litigation expense, merger and strategic
charges, asset impairment and depreciation expense partially offset by a
decrease in race expenses and administrative and indirect expenses, as described
below.

         Race distributions for the quarter ended September 30, 2003 were $21.1
million, an increase of $12.6 million from the same period in the prior year.
Race distributions are made up of purse payments, year-end points fund,
participation payments, entrant support payments and team assistance. The
increase was partially due to an increase in participation payments that we make
to all of our teams, from $10,000

                                       22

<PAGE>

per car per race in 2002 to $20,000 per car per race in 2003. In addition, for
the 2003 Champ Car World Series we began an entrant support program where we
make payments of $22,500 per car per race to each participating team. The total
increase in participation and entrant support payments are $5.0 million compared
to the same period in the prior year. In the quarter ended September 30, 2003,
we have also provided, in aggregate, team assistance payments of $8.0 million to
substantially all of our teams to ensure their participation in our series for
the 2003 season compared with $774,000 in the same period in the prior year.

         Race expenses for the quarter ended September 30, 2003 were $2.6
million, a decrease of $1.5 million, or 37%, from the same period in the prior
year. The decrease was primarily attributable to a reduction in staff and
officials and their related travel expenses in the areas of logistics, safety,
competition and timing and scoring.

         Race promotion expenses for the quarter ended September 30, 2003, were
$9.9 million, an increase of $4.4 million, or 81% from the same period in the
prior year. The increase in expenses is due to promoting three races in the
quarter ended September 30, 2003, compared to one race in the same period in the
prior year. The expenses relate to administrative expenses and direct expenses
for the races we promoted in the quarter ended September 30, 2003 in Cleveland,
Ohio, Lexington, Ohio and Miami, Florida. Race promotion expenses relate to all
costs associated with staging a Champ Car event. Administrative expenses are
recognized when incurred; expenses directly related to the event are recorded as
deferred or prepaid expenses and are recognized in the period the race takes
place, unless it can be determined that prepaid expenses will not be recovered
from revenues from the event. Prepaid expenses are then recognized in the
statements of operations, to the extent they are determined unrecoverable, in
the period when it is determined they are unrecoverable. Race promotion expenses
for the three months ended September 30, 2002, were $5.5 million. We entered
into an agreement with Raceworks, LLC to act as the co-promoter of the Miami
event in 2002. We funded substantially all of the costs associated with the race
in Miami and incurred $5.5 million of race promotion expenses. The race which
took place on October 6, 2002 was included in our results for the period ended
September 30, 2002. We included expenses that were determined to be
unrecoverable as they were in excess of revenues from the race.

         Television expense for the quarter ended September 30, 2003 was $6.5
million, an increase of $1.6 million, or 33%, from the same period in the prior
year. The increase was partially due to a change in our television agreement
with Speed Channel from the previous year. In 2002, Speed Channel paid for the
production and received the advertising inventory for shows broadcast on its
network. In 2003, we pay for the production and we receive the advertising
inventory. There were four Speed Channel races in the quarter ended September
30, 2003. One of our races appeared on HD Net TV where production costs were
shared. We also incur incremental expenses to provide an international feed for
all of our races.

         Administrative and indirect expenses for the quarter ended September
30, 2003 were $6.1 million, a decrease of $2.9 million, or 32%, from the same
period in the prior year. This decrease was primarily attributable to a decrease
in marketing, advertising and sponsor fulfillment costs partially offset by an
increase in insurance expense, legal fees, sales staff and related sales costs.

         Litigation and settlements expense was $1.3 million for the quarter
ended September 30, 2003, with no corresponding expense in the same prior year
period. The expense was attributable to an arbitration award to Action
Performance Companies, Inc. in a breach of contract case in regard to a licensed
merchandise contract and settlement of an early termination of a sanction
agreement with International Motorsports Association, Inc. ("IMSA") in regard to
a race in Miami, Florida.

                                       23

<PAGE>

         Merger and strategic charges were $1.4 million for the quarter ended
September 30, 2003, with no corresponding expense in the same prior year period.
The expense is attributable to financial and legal consulting expenses related
to the proposed merger with Open Wheel.

         Asset impairment charges were $3.3 million for the quarter ended
September 30, 2003, with no corresponding expense in the same prior year period.
The expense relates to non-cash asset impairment associated with the reduction
of carrying value of property and equipment in the amount of $2.0 million and
the write-off of intangible assets, including goodwill in the amount of $1.3
million, with respect to Raceworks, LLC.

         Depreciation and amortization for the quarter ended September 30, 2003
was $1.0 million, compared to depreciation and amortization of $357,000 for the
same period in the prior year. The increase was primarily due to depreciation on
engines that we purchased for use in our series for the 2003 and 2004 seasons.

         OPERATING LOSS. Operating loss for the quarter ended September 30, 2003
was $34.9 million, compared to operating loss of $13.7 million in the
corresponding period in the prior year due to the items discussed above.

         INTEREST INCOME. Interest income for the quarter ended September 30,
2003 was $248,000, a decrease of $634,000, or 72%, from the same period in the
prior year. This is primarily due to a decrease in cash and short-term
investments and in interest rates.

         LOSS BEFORE INCOME TAXES. Loss before income taxes for the quarter
ended September 30, 2003 was $34.4 million, compared to loss before income taxes
of $12.8 million for the same period in the prior year due to the items
discussed above.

         INCOME TAX EXPENSE/BENEFIT. There was no income tax expense or benefit
for the quarter ended September 30, 2003, compared to an income tax benefit of
$4.5 million for the corresponding period in the prior year. Income tax
expense/benefit for the quarter ended September 30, 2003 reflects management's
decision to record a valuation allowance for all net deferred tax assets. The
effective tax rate was 35.0% for the quarter ended September 30, 2002.

         NET LOSS. Net loss for the quarter ended September 30, 2003 was $34.4
million compared to a net loss of $8.3 million for the same period in the prior
year due to the items discussed above.

Nine Months Ended September 30, 2003 Compared to Nine Months Ended September 30,
2002

         REVENUES. Total revenues for the nine months ended September 30, 2003
were $38.7 million, compared to $43.4 million during the same period in the
prior year. The decrease was due to a decrease in sanction fees, sponsorship
revenue, television revenue and other revenue partially offset by an increase in
race promotion and engine leases as described below.

         Sanction fees for the nine months ended September 30, 2003 were $16.1
million, a decrease of $11.0 million, or 40%, from the same period in the prior
year. The decrease was partially attributable to running eleven races that paid
sanction fees in the period ended September 30, 2003 compared to thirteen races
in the same period in the prior year. The decrease was also due to negotiated
reductions in sanction fees with certain promoters. In addition, one of the
races that was not run in 2003 was the race in Motegi, Japan, a higher paying
international race.

                                       24

<PAGE>

         Sponsorship revenue for the nine months ended September 30, 2003 was
$6.6 million, a decrease of $1.4 million, or 18%, from the same period in the
prior year. This decrease was primarily attributable to the loss of sponsorship
income from our former title sponsor. The decrease was partially offset by new
sponsorship from our two presenting sponsors Bridgestone/Firestone North
American Tire, LLC and Ford Motor Company.

         Television revenue for the nine months ended September 30, 2003 was
$1.7 million, a decrease of $2.5 million, or 59%, from the same period in the
prior year. The decrease was primarily attributable to a reduction in rights
sales for our international television rights and a decrease in television
advertising revenue from our seven races broadcast on CBS, partially offset by
advertising revenue from our Speed Channel broadcasts. In 2003, we pay for the
production for all of our shows and we receive the television advertising
inventory. In 2002, Speed Channel paid for the production of the shows aired on
its network and received the advertising inventory.

         Race promotion revenue for the nine months ended September 30, 2003 was
$10.6 million, an increase of $9.2 million, from the same period in the prior
year. The increase was attributable to promoting six races in Kent, England,
Lausitz, Germany, Portland, Oregon, Cleveland, Ohio, Lexington, Ohio and Miami,
Florida in the nine months ended September 30, 2003 compared to one race in
Chicago, Illinois in the same prior year period.

         Engine lease revenue for the nine months ended September 30, 2003 was
$1.4 million, with no corresponding revenue in the prior period. We purchased
the engines that will be used in our series for the 2003 and 2004 seasons. The
engines are leased to the teams for $100,000 per car per year payable in four
installments.

         Other revenue for the nine months ended September 30 2003 was $2.2
million, which was a decrease of $431,000, or 16%, from the same period in the
prior year. Other revenue includes membership and entry fees, contingency awards
money, royalty income, commission on parts sales and other miscellaneous
revenue. The decrease was primarily due to a decrease in entry fees in CART due
to a waiver of those fees for 2003, fewer participants in the Toyota Atlantic
series and a decrease in merchandise sales from licensed merchandise.

         EXPENSES. Total expenses for the nine months ended September 30, 2003
were $117.4 million, an increase of $51.6 million, or 78%, from the same period
in the prior year. This increase was due to an increase in race distributions,
race promotion, television expense, litigation, merger and strategic charges,
asset impairment and depreciation expense partially offset by a decrease in race
expenses, administrative and indirect expenses and relocation expenses, as
described below.

         Race distributions for the nine months ended September 30, 2003 were
$49.7 million, an increase of $34.0 million, or 215% from the same period in the
prior year. Race distributions are made up of purse payments, year-end points
fund, participation payments, entrant support payments and team assistance. The
increase was partially due to having sixteen races in the nine months ended
September 30, 2003 compared to fifteen races in the same period in the prior
year. The increase was also due to an increase in participation payments that we
make to all of our teams, from $10,000 to $20,000 per car per race. In addition,
for the 2003 Champ Car World Series we began an entrant support program where we
make payments of $22,500 per car per race to each participating team. The total
increase in participation and entrant support payments are $10.1 million
compared to the same period in the prior year. In the nine months ended
September 30, 2003, we have also provided, in aggregate, team assistance
payments of $23.9 million to substantially all of our teams to ensure their
participation in our series for the 2003 season, compared to $1.3 million in the
same period in the prior year.

                                       25
<PAGE>

         Race expenses for the nine months ended September 30, 2003 were $6.5
million, a decrease of $1.9 million, or 23%, from the same period in the prior
year. The decrease was primarily attributable to a reduction in staff and
officials and their related travel expenses in the areas of logistics, safety,
competition and timing and scoring, partially offset by having one more race in
the nine months ended September 30, 2003 when compared to the same prior year
period.

         Race promotion expenses for the nine months ended September 30, 2003,
were $20.8 million, an increase of $11.8 million, or 133%, from the same period
in the prior year. The increase in expenses is due to promoting six races in the
nine months ended September 30, 2003 compared to two races in the same prior
year period. The expenses relate to administrative and direct expenses incurred
for all the races we promoted. During the nine months ended September 30, 2003,
we promoted races in Kent, England, Lausitz, Germany, Portland, Oregon,
Cleveland, Ohio, Lexington, Ohio and Miami, Florida. During the nine months
ended September 30, 2002 we promoted races in Chicago, Illinois and Miami,
Florida. Race promotion expenses relate to all costs associated with staging a
Champ Car event. Administrative expenses are recognized when incurred. Expenses
directly related to the event are recorded as deferred or prepaid expenses and
are recognized in the period the race takes place, unless it can be determined
that prepaid expenses will not be recovered from revenues from the event.
Prepaid expenses are then recognized in the statements of operations, to the
extent they are determined unrecoverable, in the period when it is determined
they are unrecoverable. Race promotion expenses for the nine month period ended
September 30, 2002 included $3.5 million of expenses incurred in connection with
our self-promoted race, the CART Grand Prix of Chicago, and include all expenses
associated with promoting that race. In 2002, we entered into an agreement with
Raceworks, LLC to act as the co-promoter of the Miami event. We funded
substantially all of the costs associated with the race in Miami and incurred
$5.5 million of race promotion expenses. The race, which took place on October
6, 2002, was included in our results for the period ended September 30, 2002. We
included expenses that were deemed to be unrecoverable as they were in excess of
revenues from the race.

         Television expense for the nine months ended September 30, 2003 was
$13.9 million, an increase of $4.3 million, or 45%, from the same period in the
prior year. The increase was partially due to a change in our television
agreement with Speed Channel from the previous year. In 2002, Speed Channel paid
for the production and received the advertising inventory for shows broadcast on
its network. In 2003, we pay for the production and we receive the advertising
inventory. For the nine months ended September 30, 2003, we had eight races
broadcast on Speed Channel. In addition, in 2003 we had one show broadcast on HD
Net TV with whom we shared the production expenses and we produced and paid for
air-time for a preseason preview show that aired on CBS. We also incur
incremental expenses to provide an international feed for all of our races.

         Administrative and indirect expenses for the nine months ended
September 30, 2003 were $16.3 million, a decrease of $4.4 million, or 21%, from
the same period in the prior year. This decrease was primarily attributable to a
decrease in marketing and advertising and sponsor fulfillment expenses partially
offset by an increase in insurance expense, legal fees, sales staff and related
sales costs.

         Litigation and settlements expense was $2.7 million for the nine months
ended September 30, 2003, with no corresponding expense in the same prior year
period. This expense was partially attributable to an arbitration settlement of
$1.75 million paid to Engine Developments Ltd. in a breach of contract case over
a contract to purchase engines; settlement of a breach of contract suit filed by
two former team owners, DellaPenna Motorsports and Precision Preparation, Inc.;
settlement of contract disputes with ESPN television over the canceled Texas
Motor Speedway race; an arbitration award to Action Performance Companies, Inc.
in a breach of contract case in regard to a licensed merchandise contract; a
settlement of $1.7 million paid to Joseph F. Heitzler, a former director and
former chairman, chief executive officer and president of the Company in a
breach of contract case; and settlement of an

                                       26

<PAGE>

early termination of a sanction agreement with IMSA in regard to a race in
Miami, Florida. The expenses were partially offset by receipt of $1.0 million
from proceeds received from a bankruptcy settlement regarding claims filed
against EuroSpeedway Lausitz for loss of sanction fees and other damages that
occurred when the 2002 event was canceled as a result of the bankruptcy of the
promoter.

         Relocation expense was $1.3 million for the nine months ended September
30, 2002 with no corresponding expense in the current year period. The expense
related to the companies relocation from Troy, MI to Indianapolis, IN.

         Merger and strategic charges were $1.4 million for the nine months
ended September 30, 2003, with no corresponding expense in the same prior year
period. The expense is attributable to financial and legal consulting expenses
related to the proposed merger with Open Wheel.

         Asset impairment charges were $3.3 million for the nine months ended
September 30, 2003, with no corresponding expense in the same prior year period.
The expense relates to asset impairment associated with the reduction of
carrying value of property and equipment in the amount of $2.0 million and the
write-off of intangible assets, including goodwill in the amount of $1.3
million, with respect to Raceworks, LLC.

         Depreciation and amortization for the nine months ended September 30,
2003 was $2.8 million, compared to depreciation and amortization of $1.0 million
for the same period in the prior year. The increase was primarily due to
depreciation on engines that we purchased for use in our series for the 2003 and
2004 seasons.

         OPERATING LOSS. Operating loss for the nine months ended September 30,
2003 was $78.7 million, compared to operating loss of $22.4 million in the
corresponding period in the prior year due to the items discussed above.

         INTEREST INCOME. Interest income for the nine months ended September
30, 2003 was $1.1 million, a decrease of $2.0 million, or 64%, from the same
period in the prior year. This is primarily due to a decrease in interest rates
and in cash and short-term investments.

         LOSS BEFORE INCOME TAXES. Loss before income taxes for the nine months
ended September 30, 2003 was $77.2 million, compared to loss before income taxes
of $19.3 million for the same period in the prior year due to the items
discussed above.

         INCOME TAX EXPENSE/BENEFIT. Income tax expense for the nine months
ended September 30, 2003 was $660,000, compared to an income tax benefit of $6.8
million for the corresponding period in the prior year. Income tax expense for
the nine months ended September 30, 2003 reflects management's decision to
record a valuation allowance for all net deferred tax assets. The effective tax
rate was 35.0% for the nine months ended September 30, 2002.

         LOSS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE. Loss before
cumulative effect of accounting change for the nine months ended September 30,
2003 was $77.9 million compared to $12.6 million for the corresponding period in
the prior year.

         CUMULATIVE EFFECT OF ACCOUNTING CHANGE (NET OF TAX). There was no
cumulative effect of accounting change for the nine months ended September 30,
2003 compared to $956,000 for the corresponding period in the prior year. The
amount relates to our implementation of Statement of Financial Account Standard
No. 142 pursuant to which we wrote off our impaired goodwill.

                                       27

<PAGE>

         NET LOSS. Net loss for the nine months ended September 30, 2003 was
$77.9 million compared to a net loss of $13.5 million for the same period in the
prior year due to the items discussed above.

SEASONALITY AND QUARTERLY RESULTS

         A substantial portion of our total revenues during the race season is
expected to remain seasonal, based on our race schedule. Our quarterly results
vary based on the number of races held during the quarter. In addition, whether
the race pays a sanction fee or is self promoted and whether the races are aired
on network television or Speed Channel will affect our quarterly results.
Consequently, changes in race schedules from year to year, with races held in
different quarters, will result in fluctuations in our quarterly results and
affect comparability. During each of the quarters ended September 30, 2003 and
2002, we held eight races. In the quarter ended September 30, 2003, we held
races in: Cleveland, Ohio; Toronto, Canada; Vancouver, Canada; Elkhart Lake,
Wisconsin; Lexington, Ohio; Montreal, Canada; Denver, Colorado and Miami,
Florida. In the quarter ended September 30, 2002, we held races in: Toronto,
Canada; Cleveland, Ohio; Vancouver, Canada; Lexington, Ohio; Elkhart Lake,
Wisconsin; Montreal, Canada; Denver, Colorado and Rockingham, England. We have
provided unaudited quarterly revenues for the third quarter of 2003 and 2002 in
the following table.

<TABLE>
<CAPTION>
                                        QUARTER ENDED
                                        -------------
                                        SEPTEMBER 30,
                                        -------------
(DOLLARS IN THOUSANDS)                2003          2002
                                   ----------    ----------
<S>                                <C>           <C>
Revenues                           $   18,170    $   18,537
Number of races                             8             8
</TABLE>

LIQUIDITY AND CAPITAL RESOURCES

         As announced previously, in light of the significant near term
financial challenges facing the Company, we retained the investment banking firm
of Bear Stearns & Co. Inc. to assist us in exploring financing and other
strategic alternatives that may be available to us. On August 18, 2003, the
Company announced it had received a proposal from Open Wheel and was engaged in
negotiations regarding a possible transaction with Open Wheel. Subsequently, on
September 10, 2003, the Company and Open Wheel announced that they had signed a
definitive merger agreement providing for Open Wheel to acquire the Company for
cash equivalent to $0.56 per share, based on the number of shares of Company
common stock then outstanding (which we will not take any action to increase
while the proposed transaction is pending). Specified events leading up to the
proposed merger are discussed below. For a more complete description of the
proposed merger, see the preliminary proxy statement filed by the Company with
the Securities and Exchange Commission on October 7, 2003.

         In the past two years, our financial condition has deteriorated
significantly. CART, Inc., our wholly owned subsidiary that operates the Champ
Car World Series, has experienced a significant reduction in revenue from all of
its previous revenue sources, including sanction fees, television programming
and sponsorship fees. At the same time, race promoters, who are critical
partners in the Champ Car World Series, also experienced a deterioration in
their financial condition. This deterioration was primarily attributable to a
decrease in promotional and advertising expenditure by corporations due to the
general downturn in the economy, decreased attendance at some race venues as a
result of the split with the Indy Racing League and competition from NASCAR,
which has experienced rapid growth during this period. In addition, during this
period, two of the three engine manufacturers which supplied engines for the
Champ Car World Series left the series to participate in the Indy Racing League.
Our teams, which were supported to a significant degree by engine manufacturers
and their suppliers, were being encouraged to follow those manufacturers to the
Indy Racing League. The teams that elected to participate in the Champ Car World
Series experienced a dramatic loss of sponsorship revenue related to the
departed engine manufacturers as well as the adverse economic conditions that
caused companies to

                                       28

<PAGE>

cut back promotion and advertising of their brands. In addition, the teams
experienced increased costs because they were required to pay for the lease of
engines as compared to receiving free engine leases in the past. These
conditions required CART, Inc. to expend significant amounts of capital on entry
support programs and team participation payments to encourage teams to remain in
the Champ Car World Series.

         Beginning in 2001, CART, Inc. lost several important race venues. Three
of CART, Inc.'s more profitable international races were lost due to, in the
case of Brazil, an adverse political climate, in the case of Germany, bankruptcy
of the promoter and, in the case of Japan, the decision by the race venue, which
was owned by Honda Motor Company, not to renew with CART, Inc. but rather to run
an Indy Racing League event in which participating teams were using Honda
engines. CART, Inc. was also forced to cancel another race due to safety
concerns. Promoters of CART, Inc.'s other events were also experiencing
weakening revenue streams and therefore began demanding lower sanction fees or
sanction fees that were based either in whole or in part on a revenue or net
income sharing model. CART, Inc. lost some promoters altogether. In order to
preserve important markets, CART, Inc. began self-promoting some of its series
races rather than utilizing third party promoters. In 2002, CART, Inc. promoted
two of its races and in 2003 it promoted six of its races. Unfortunately, due to
unfavorable trends in consumer and corporate spending, the overall economic
conditions affecting advertising in open-wheel motorsports and the entertainment
industry in general and the declining popularity of open-wheel motorsports in
the United States, the expenses of self-promoted races were significantly
greater than the revenues generated.

         During 2001, CART, Inc. began negotiations for a new television
agreement to replace its existing fixed fee television agreement that was due to
expire at the end of the 2001 season. The existing agreement guaranteed that at
least half of the Champ Car World Series races would be shown on network
television (ABC) and the balance of the races would be shown on the ESPN cable
network. The existing agreement provided a guaranteed amount of income with no
offsetting expenses. Unfortunately, CART, Inc. was unable to negotiate an
acceptable fixed fee television agreement to replace the existing agreement.
Therefore, beginning in 2002, CART, Inc. began buying the air-time and bearing
the production costs for its television broadcasts in order to provide its race
sponsors, race promoters and team sponsors with adequate television coverage of
its races. CART, Inc.'s television revenue thus became dependent solely upon
advertising and international rights sales. In addition, the new television
agreements provided for fewer network broadcasts and a significant number of
races broadcast on a cable network with less exposure than ESPN. Due to the
adverse economic and industry developments described in the previous paragraph
and CART, Inc.'s limited experience with selling television advertising, the
revenue generated from sales of television advertising was significantly less
than the costs to produce and air the television broadcasts.

         Also in 2001 and 2002, difficult economic conditions and other factors
adversely affected CART, Inc.'s sponsorship revenues. Beginning in 1999, CART,
Inc. had outsourced its sponsorship sales function pursuant to a long-term
contract which guaranteed CART, Inc. a minimum amount of annual sponsorship
revenue plus escalations on an annual basis. At the beginning of 2001, however,
CART, Inc.'s sponsorship sales partner defaulted on its contract, ceased
operations and filed for bankruptcy protection. As a result, CART, Inc. was
required to build an internal sponsorship sales force. This sales force had to
operate under adverse economic conditions that caused corporate sponsors to
reduce their expenditures for both teams and the Champ Car World Series. The
decline in sponsorship revenue was also attributable to our weakened television
package, as sponsors value a sponsorship opportunity largely on the amount of
exposure they receive on television. In some cases, corporate sponsors left the
Champ Car World Series to align themselves with a rival series. In other cases,
corporate sponsors left motorsports altogether. Our title sponsor for the
previous four years decided not to renew its title sponsorship and withdrew from
the Champ Car World Series after the 2002 season.

         Other factors also contributed to our declining financial condition
during this time period. During 2001, CART, Inc. was in negotiations to change
the engine specifications for the Champ Car World

                                       29

<PAGE>

Series beginning with the 2003 race season. At the time, American Honda Motor
Company, Toyota Motor Sales, U.S.A., Inc. and Ford Motor Company supplied
engines for the Champ Car World Series. In some cases, these car manufacturers
supplied free engines and provided other financial support to certain teams. In
addition, the manufacturers were major sponsors for race promoters and also
purchased large quantities of television advertising. At the end of the 2002
season, however, Honda and Toyota left the Champ Car World Series to participate
in the Indy Racing League. Several of the teams participating in the Champ Car
World Series followed Honda and Toyota to the rival series. Although CART, Inc.
was able to enter into a contract with a subsidiary of Ford to purchase and
service engines for the Champ Car World Series for the 2003 and 2004 seasons,
the loss of Honda and Toyota had an adverse effect on CART, Inc. and the Champ
Car World Series promoters and teams.

         As a result of the foregoing, by the middle of 2002 it had become
apparent to CART, Inc. that it would need to find a way to retain its remaining
teams and attract new teams in order to have 18 to 20 race cars in the field for
the 2003 season. Failure to field 18 to 20 race cars would, depending on the
agreements, have resulted in defaults under certain promoter and television
agreements. In light of the circumstances, CART, Inc. believed that the only way
to retain existing teams and attract new teams would be to provide participating
teams with additional financial support. CART, Inc. believed that this support
would result in increased team participation in 2003 and would give it the
opportunity to market its television and sponsorship rights on a profitable
basis. Therefore, in August 2002, CART, Inc. announced its entry support program
and increased its existing team participation payments in order to ensure
adequate team participation in the 2003 Champ Car World Series. The entry
support program and the team participation payments provide a total of $42,500
in cash payments to teams, per race, for each car entered in the 2003 Champ Car
World Series. Management estimates that these payments will amount to a total of
$15,342,500 for the 2003 Champ Car World Series. These payments are in addition
to prize money and other non-monetary benefits that accrue to participating
teams. In October 2002, recognizing the difficulties the teams were having in
securing sponsorship, CART, Inc. announced its commitment to spend an aggregate
amount of $30 million in team assistance payments, which would be in addition to
the entry support program and team participation payments. In exchange for the
entry support, team participation and team assistance payments, the teams agreed
to participate in the Champ Car World Series for the entire 2003 season and
granted CART, Inc. the right to sell certain advertising space on the teams'
racecars. CART, Inc. planned to package this advertising opportunity with its
advertising inventory from television and self-promoted races. CART, Inc.
believed this would provide an integrated marketing opportunity to sponsors
whereby they could participate at the team, race event and series levels.
However, CART, Inc. was unsuccessful in selling the integrated advertising
packages.

         On October 29, 2002, the Company retained Bear Stearns to act as its
financial advisor in its consideration of strategic alternatives to increase
stockholder value.

         At this time, management, at the direction of the board of directors,
began developing a four-year business plan incorporating the changing business
model discussed above, including financial forecasts for the four fiscal years
ending December 31, 2006. From October 2002 to April 2003, the Company's
management worked with an outside consultant to develop the business plan.

         During the spring and summer of 2003, the overall economic, financial
and operating conditions affecting our business continued to deteriorate. These
developments were reflected in a series of deteriorating financial forecasts
provided to our board of directors and publicly disclosed on June 16, 2003, July
22, 2003 and August 11, 2003. Consequently, the expectations of management and
our board of directors as to our future performance diminished and it became
clear to management that we would not have sufficient resources to fund the
Champ Car World Series in 2004, even if the entry support, team participation
and team assistance payments were reduced.

                                       30

<PAGE>

         On August 18, 2003, the Company publicly announced that it had received
a proposal from Open Wheel and that it was engaged in negotiations regarding a
possible transaction with Open Wheel.

         On August 24, 2003, the Company publicly announced that its board of
directors had instructed management to continue negotiating with Open Wheel with
respect to all terms related to a possible acquisition of the Company. The
Company, Open Wheel and their respective advisors continued to engage in
negotiations regarding the terms of a possible transaction and related
definitive agreements.

         On September 10, 2003, representatives of the Company, Open Wheel and
Open Wheel Acquisition Corp., a wholly-owned subsidiary of Open Wheel, executed
and delivered the merger agreement and other related agreements and issued a
joint press release announcing the proposed transaction.

         A preliminary proxy statement related to the proposed merger has been
filed with the SEC. A definitive proxy statement will be mailed to stockholders
an appropriate period of time prior to a special meeting of the stockholders to
vote to adopt the merger agreement. The special meeting is anticipated to take
place prior to the end of 2003.

         Expenses related to the merger are expected to be approximately $3.3
million.

         We have relied on our cash reserves generated in previous years to
finance working capital, contractual commitments, operating losses, investments
and capital expenditures during the past year. In 2003, we anticipate that we
will use all available funds to fund expected operating losses, capital
expenditures and other cash needs for 2003. If the proposed merger with Open
Wheel is not completed for any reason, and if no strategic transaction that is
an alternative to the merger is available to us at that time, it is expected
that we will be required immediately to cease our operations, wind up our
affairs and seek to liquidate our remaining assets because our cash resources
and other sources of liquidity would be substantially depleted by that time. In
that event, we expect that CART, Inc. and our other subsidiaries would
discontinue racing and other operations and commence liquidation. Although the
definitive merger agreement permits our board of directors to consider proposals
for a competing transaction and accept a superior proposal, no such competing
proposal is currently being considered by us as an alternative to the proposed
transaction with Open Wheel and no superior proposal is available.

         Our cash balance on September 30, 2003 was $2.1 million, a net decrease
of $4.7 million from December 31, 2002. This decrease was primarily the result
of net cash used in operating activities of $61.0 million and net cash used in
financing activities of $1.0 million, partially offset by proceeds from
investing activities of $57.3 million.

         Our short term investment balance on September 30, 2003 was $17.6
million, a net decrease of $61.9 million from December 31, 2002. This decrease
was primarily due to funding of operations for the nine months ended September
30, 2003.

         In May 2003, the Company entered into an agreement with a third party
where we paid for the costs of capital improvements retained by the third party
necessary to stage an event where we are the promoter. We accepted an unsecured
note of $750,000 for said improvements, to be received, without interest over
five years. Payment in the amount of $75,000 will be due in each of the first
four years with a final payment of $450,000 due in the fifth year. These
payments are payable each November 1st, beginning in 2003. The Company imputed
interest on the note at a rate of 6% and recorded a discount on the note
receivable which reduced the note by $146,000.

         In June 2003, the Company entered into an amendment to a sanction
agreement with a promoter where we accepted a note in the amount of $400,000 as
payment for a portion of the sanction fee. This

                                       31

<PAGE>

note is payable in 36 equal monthly installments, bearing interest at 10% per
annum, beginning January 1, 2004. The note is secured by all products and
proceeds of all other events staged by the promoter at the promoter's facility.

         In April 2002, we entered into a lease for our new corporate
headquarters in Indianapolis, Indiana. The lease commenced on May 1, 2002 and
expires on October 31, 2010. The total amount due through the life of the lease
is $2.6 million.

         In March 2003, we entered into a lease for office space in Miami,
Florida. The lease commenced on June 1, 2003 and expires on May 31, 2008. The
total amount due through the life of the lease is $478,198.

         The following table summarizes our contractual obligations as of
September 30, 2003.

<TABLE>
<CAPTION>
                                                                 Payments due by Period
                                                                 ----------------------
                                                        Less Than          1-3            4-5           After 5
Contractual Obligations                  Total           1 Year           Years          Years           Years
------------------------------------------------------------------------------------------------------------------
<S>                                   <C>             <C>             <C>             <C>             <C>
Operating Leases                      $  2,945,649    $    399,613    $    806,563    $    786,830    $    952,643
Team Assistance Payments                 6,216,055       4,216,055       2,000,000              --              --
Entrant Support Program                  2,422,500       2,422,500              --              --              --
Television Buys                          4,107,000       4,107,000              --              --              --
Other Long-Term Obligations              7,489,376       4,177,376       2,981,953         330,048
                                      ------------    ------------    ------------    ------------    ------------
Total Contractual Cash Obligations    $ 23,180,580    $ 15,322,544    $  5,788,516    $  1,116,878    $    952,643
                                      ============    ============    ============    ============    ============
</TABLE>

         In July 2002, we guaranteed a $1.8 million commercial term loan in
connection with our acquisition of Raceworks, LLC. The Company subsequently
acquired this loan in conjunction with the acquisition of Raceworks, LLC and has
recorded the loan in its long-term debt as of September 30, 2003. The principal
on the loan shall be paid quarterly, commencing on October 31, 2003 and on the
last day of each January, April, July and October thereafter, in the amount of
$50,000 per quarter. The entire unpaid principal amount of the loan and all
accrued and unpaid interest and other amounts payable thereunder shall be due
and payable in July 2007. The loan may be prepaid, in whole or in part, without
a penalty. The rate of interest on the outstanding principal amount of the loan
will be equal to The Wall Street Journal prime rate (the "prime rate") plus 150
basis points. (As of September 30, 2003, the rate of interest was 5.5 %.)

         At June 30, 2003 and September 30, 2003, the Company was in default of
certain financial covenants for which a waiver will be requested. As a result
the entire amount of the note has been classified as current.

         On March 7, 2003, we acquired 100% of the equity in Raceworks, LLC. The
purchase price was $1.2 million, including $473,000 of cash and a contingent
promissory note of $722,000, without interest, and assumption of liabilities of
$4.7 million. At September 30, 2003, the Company was in default of certain
payment obligations and the contingent promissory note became due and payable
and has been classified as current. Operating results and cash flows of
Raceworks, LLC were significantly lower than expected during the quarter ended
September 30, 2003. Based on those results and other qualitative information,
the future earnings forecasts were revised. The Company recognized a non-cash
asset impairment charge of $1,262,000 to write-off goodwill and other intangible
assets related to the purchase of Raceworks, LLC. The fair value of the
reporting unit was estimated using the present value of expected future cash
flows.

         Litigation and settlements expense was $2.7 million for the nine months
ended September 30, 2003. This expense was partially attributable to an
arbitration settlement of $1.75 million paid in August

                                       32

<PAGE>

2003, to Engine Developments Ltd. in a breach of contract case over a contract
to purchase engines, a settlement of a breach of contract suit filed by two
former team owners, DellaPenna Motorsports and Precision Preparation, Inc.,
settlement of contract disputes with ESPN television over the canceled Texas
Motor Speedway race, an arbitration award to Action Performance Companies, Inc.
in a breach of contract case in regard to a licensed merchandise contract, and
settlement of an early termination of a sanction agreement with IMSA in regard
to a race in Miami, Florida. The expenses were partially offset by receipt of
$1.0 million from proceeds received from a bankruptcy settlement regarding
claims filed against EuroSpeedway Lausitz for loss of sanction fees and other
damages that occurred when the 2002 event was canceled as a result of the
bankruptcy of the promoter.

         In addition, in August 2003 we paid $1.7 million to Joseph Heitzler,
our former CEO, in complete settlement of all actions brought by Mr. Heitzler in
claims related to his employment with the Company. The charge to expense related
to this settlement had been taken in the year-ended December 31, 2001.

FUTURE TRENDS IN OPERATING RESULTS

         If the proposed merger with Open Wheel is not completed for any reason,
and if no strategic transaction that is an alternative to the merger is
available to us at that time, it is expected that we will be required
immediately to cease our operations, wind up our affairs and seek to liquidate
our remaining assets because our cash resources and other sources of liquidity
would be substantially depleted by that time. In that event, we expect that
CART, Inc. and our other subsidiaries would discontinue racing and other
operations and commence liquidation. Although the definitive merger agreement
permits our board of directors to consider proposals for a competing transaction
and accept a superior proposal, no such proposal is currently being considered
by us as an alternative to the proposed transaction with Open Wheel and no
superior proposal is available.

RELATED PARTY TRANSACTIONS

         We have historically entered into transactions with related parties,
because several of our directors and one of our significant stockholders are
team owners. We believe that all the transactions which we have entered into
with our directors or significant stockholders have terms that are comparable to
the terms that we have in the past or could in the future enter into with
unaffiliated third parties with respect to each of these transactions. In order
to avoid conflicts of interest, any of our directors who are affiliated with an
entity that is entering into a transaction with us have not and will not vote on
any matters related to such transactions and may, in certain circumstances,
refrain from participating in any discussions related to such transactions.

         On August 18, 2003, the Company announced that it had received a
proposal from Open Wheel and was engaged in negotiations regarding a possible
transaction with Open Wheel. Subsequently, on September 10, 2003, the Company
and Open Wheel announced that they had signed a definitive merger agreement
providing for Open Wheel to acquire the Company for cash equivalent to $0.56 per
share, based on the number of shares of Company stock then outstanding (which we
will not take any action to increase while the proposed transaction is pending).
Open Wheel is owned indirectly by a group of investors and Champ Car World
Series team owners, including Kevin Kalkhoven, Paul Gentilozzi and Gerald R.
Forsythe. Because the members of Open Wheel beneficially own 3,377,400 shares,
or 23%, of our common stock contributed to Open Wheel by Mr. Forsythe on
September 26, 2003, the proposed merger with Open Wheel may constitute, if
completed, a "going-private transaction" subject to Rule 13e-3 of the Securities
Exchange Act of 1934.

                                       33

<PAGE>

         In addition to the proposed merger with Open Wheel, during the nine
months ended September 30, 2003, we entered into related party transactions with
U.E. Patrick and Mario Andretti, directors that did not stand for reelection
when their terms ended on July 17, 2003, Derrick Walker and Carl A. Haas,
directors until they resigned their positions on August 18, 2003 and September
22, 2003, respectively, Rafael Sanchez, a current director, and Gerald R.
Forsythe, a 23.0% stockholder of the Company until September 26, 2003, when he
contributed all of his shares of our common stock to Open Wheel, and currently
the beneficial owner of a substantial membership interest in Open Wheel.

         The related party transactions under "Purse Distributions, Entry
Support Program and Lease Arrangements" are all payments or transactions that
are made on an identical basis to all race teams, whether they are affiliated
with directors or significant stockholders or not affiliated. The payments
payable to related parties under the caption "Team Assistance Program" relate to
further assistance that we are providing to race teams to assure their
participation in the 2003 race season. The amounts payable to each race team
vary, depending upon the team's ability to raise third party sponsorship, the
number of cars that the team will race in 2003, their budget and other factors.
We believe that these payments are necessary to ensure that there will be 18 to
20 competitive race cars in the field for the 2003 season. We believe that the
amounts payable to each of the race teams affiliated with a director or a
substantial stockholder are consistent with arrangements that we could enter
into with unaffiliated third parties. Both of these programs were developed to
ensure the necessary participation in the series. Without this additional
funding, it was unlikely that there would have been the necessary number of
teams for the 2003 Champ Car World Series, which would result in defaults under
certain of our promoter and television agreements. This could have resulted in
severe financial consequences to us.

         PURSE DISTRIBUTIONS, ENTRY SUPPORT PROGRAM AND LEASE ARRANGEMENTS. We
have entered into, and we will continue to enter into, transactions with
entities that are affiliated with our directors and/or 5% stockholders who are
owners of our race teams. Race teams that participate in the Champ Car World
Series receive purse distributions on a per race basis and from the year-end
point fund, which amounts have been paid based solely upon their performance in
specific races. All of these payments are made to our race teams regardless of
the affiliation with our directors or significant stockholders. The following
table provides information with respect to expenses incurred through September
30, 2003 by us to race teams that are or were affiliated with our directors
and/or significant stockholders:

<TABLE>
<CAPTION>
       RACE TEAM/AFFILIATED PERSON             PURSE DISTRIBUTIONS
------------------------------------------     -------------------
<S>                                            <C>
Forsythe Racing, Inc./Gerald R. Forsythe           $ 1,420,250
Newman/Haas Racing/Carl A. Haas                      1,373,000
Derrick Walker Racing, Inc./Derrick Walker             538,500
Patrick Racing, Inc./U.E. Patrick                      430,000
Rocketsports, Inc./Paul Gentilozzi                     386,000
PK Racing LLC/Kevin Kalkhoven                          287,000
</TABLE>

         In 2003, we lease engines and provide financial assistance to every
team that participates in the Champ Car World Series, including teams affiliated
with our directors and/or 5% stockholders. The financial assistance payments
relate to two programs instituted for the 2003 season, the Entry Support Program
(ESP) and the Team Assistance Program. ESP will provide up to $42,500 in cash
payments to teams, per race, for each car entered into the series.

         We have entered into a sponsorship agreement with Ford Motor Company,
which provides in part, that Ford will lease to each of the teams Ford vehicles
for their use in 2003. For ease of administration, Ford has leased these
vehicles to us and we have subleased the vehicles to each team on a net basis.
There is no net cost or benefit to us related to this arrangement.

                                       34

<PAGE>

         We purchased 100 race engines from Cosworth Racing, Inc. for a total
purchase price of $4.0 million and agreed to pay for track support in the amount
of $1.5 million for the 2003 and 2004 seasons. We in turn have leased these
engines to each team on the basis of $100,000 per entrant per race season.

         The following table lists the amount of engine lease income we have
earned and ESP expenses we have incurred to related parties through September
30, 2003.

<TABLE>
<CAPTION>
                                               ENGINE LEASE INCOME     ESP PAYMENTS
        RACE TEAM/AFFILIATED PERSON                FROM TEAMS            TO TEAMS
------------------------------------------     -------------------     ------------
<S>                                            <C>                     <C>
Newman/Haas Racing/Carl A. Haas                    $  150,000          $  1,360,000
Forsythe Racing, Inc./Gerald R. Forsythe              150,000             1,360,000
Derrick Walker Racing, Inc./Derrick Walker            150,000             1,360,000
Patrick Racing, Inc./U.E. Patrick                      75,000               680,000
PK Racing LLC/Kevin Kalkhoven                          75,000               680,000
Rocketsports, Inc./Paul Gentilozzi                     75,000               680,000
</TABLE>

         TEAM ASSISTANCE PROGRAM. The Team Assistance Program will supply up to
an additional $33.0 million in team assistance spread over the 2003 race season
as described above. The following table sets forth the Team Assistance Program
expenses incurred to teams affiliated with directors and/or 5% stockholders
through September 30, 2003.

<TABLE>
<CAPTION>
       RACE TEAM/AFFILIATED PERSON             TEAM ASSISTANCE
------------------------------------------     ---------------
<S>                                            <C>
Derrick Walker Racing, Inc./Derrick Walker       $ 4,443,750
Newman/Haas Racing/Carl A. Haas                    1,500,000
Rocketsports, Inc./Paul Gentilozzi                 1,500,000
Patrick Racing, Inc./U.E. Patrick                  1,050,000
PK Racing LLC/Kevin Kalkhoven                        750,000
</TABLE>

PROMOTER AGREEMENTS

         Some of our directors or stockholders either control or are affiliated
with others who control racing venues which stage Champ Car and other racing
events. We have entered into the following agreements with entities associated
with directors or 5% stockholders:

         Carl A. Haas, who resigned as a director on September 22, 2003, is a
principal owner of Carl Haas Racing Teams, Ltd. which has entered into a
Promoter Agreement with respect to the Champ Car World Series race at the
Wisconsin State Park Speedway in West Allis, Wisconsin. The agreement granted
Carl Haas Racing Teams, Ltd. the option to promote the race in 2003 and 2004.
Carl Haas Racing Teams, Ltd. has elected to exercise the option for 2003, but
not for 2004. Pursuant to the Promoter Agreement, entities affiliated with Mr.
Haas have paid sanction fees to us of $1.4 million for the 2003 event. Beginning
in 2004, the Champ Car World Series race at West Allis, Wisconsin will be
promoted by the Wisconsin State Fair Grounds and Mr. Haas will no longer have an
affiliation with the promotion of this event.

         Gerald R. Forsythe is a principal owner of the entities which entered
into Promoter Agreements with respect to Champ Car World Series races in
Monterrey, Mexico and Mexico City, Mexico. These agreements were amended in 2003
to reduce the amount of the sanctions fees payable to us. Pursuant to terms
thereof, a Champ Car World Series race will be held at Monterrey through 2005
and Mexico City

                                       35

<PAGE>

through 2006. These entities affiliated with Mr. Forsythe have paid or will pay
sanction fees to us in the aggregate amount of $4.9 million for 2003, $5.0
million for 2004, $5.2 million for 2005 and $2.7 million for 2006.

OTHER RELATED PARTY TRANSACTIONS

         In addition to the above, we have entered into the following
transactions with related parties:

         Mr. Forsythe is also a principal owner of the entity that holds our
Mexican television rights. In return for granting the Mexican television rights,
CART, Inc. will receive a minimum guaranteed payment of $325,000 in 2003 and is
due to receive a minimum guaranteed payment of $350,000 in 2004, $375,000 for
2005, and $400,000 for 2006. In addition to the guaranteed minimum payments due
in 2004, 2005 and 2006, CART, Inc. will receive a guaranteed payment of up to
70% of the net profits of the entity holding our Mexican television rights, if
any, until CART, Inc. receives an aggregate amount of $550,000 in 2003, $600,000
in 2004, $650,000 in 2005 and $700,000 in 2006.

         Rafael Sanchez is a principal owner of RAS Development, Inc. which in
March 2003 entered into a five year lease agreement with CART, Inc. for office
space in Miami, Florida. Payments to RAS Development, Inc. under this lease
agreement total $52,528, $91,098, $93,456, $96,812, $101,259 and $43,045 for
2003, 2004, 2005, 2006, 2007 and 2008, respectively.

         Mario Andretti, a director who did not stand for reelection when his
term ended on July, 17, 2003, has entered into agreements with us whereby he
participates in certain public relations events in exchange for compensation
totaling $250,000.

         Paul Gentilozzi is the managing member of Trans Am Racing, L.L.C. which
has entered into a sanction agreement with CART, Inc. relating to the
participation of the Trans Am Series at CART, Inc.'s self promoted event in
Miami. In 2003, the agreement was amended to move the 2003 race from Miami to
Cleveland. CART, Inc. has paid or will pay sanction fees to Trans Am Racing,
L.L.C. totaling $200,000 in 2003 and $200,000 in 2004.

         We entered into a sponsorship agreement with PacifiCare Health
Services, Inc. (PacifiCare), which provides that PacifiCare will be the
"Official Health Care Provider" for the Champ Car World Series for 2003.
PacifiCare will also be provided with two thirty second advertising slots at no
cost (other than production costs) if slots are available on each of the Champ
Car race broadcasts during 2003. As consideration for the Sponsorship Agreement,
PacifiCare agreed to become a sponsor of Newman/Haas Racing for 2003 and has
granted to us the right to negotiate a sponsorship agreement with PacifiCare for
2004. Carl A. Haas is a principal owner of Newman/Haas Racing.

PAYMENTS TO CART

         In addition to the payments described above, we receive revenue from
our race teams, including those affiliated with our directors and/or 5%
stockholders, for miscellaneous items based solely on participation in our
events. As of September 30, 2003, no race teams affiliated with our directors
and/or 5% stockholders made payments to us in an amount greater than $50,000.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

         With the exception of historical information contained in this Form
10-Q, certain matters discussed are forward-looking statements. These
forward-looking statements involve risks that could cause the actual

                                       36

<PAGE>

results and plans for the future to differ from these forward-looking
statements. The factors listed below, among others, could cause the
forward-looking statements to differ from actual results and plans:

         -    the failure of the proposed merger with Open Wheel to be completed
              for any reason

         -    competition in the sports and entertainment industry

         -    participation by race teams

         -    continued industry sponsorship

         -    regulation of tobacco and alcohol advertising and sponsorship

         -    competition by the Indy Racing League

         -    liability for personal injuries

         -    success of television contracts

         -    renewal of sanction agreements

         -    participation by suppliers

         -    success of co-promoted and self-promoted races

         -    current uncertain economic environment and weak advertising market

         -    impact of engine specifications

         -    availability of financing and financial resources in the amounts,
              at the times and on the terms required to support our business

         Additional information concerning factors that could cause actual
results to differ materially from those in the forward-looking statements is
contained in the Company's SEC filings made from time to time, including, but
not limited to, the Form 10-K for the year ended December 31, 2002, as amended,
and subsequent 10-Qs. Copies of those filings are available from the Company and
the Company's website www.champcarworldseries.com and at the SEC's website
www.sec.gov. The Company undertakes no obligation to update publicly any
forward-looking statements as a result of new information, future events, or
otherwise.

ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         FOREIGN CURRENCY EXCHANGE RISK. Because we collect the revenues and
fund the expenses of two events in currencies other than the United States
dollar, we are exposed to the risk of foreign currency exchange valuation
differences. Our policy is to minimize exposure to foreign currency exchange
risk. Based on the relatively short periods of exposure, our foreign currency
exchange risk is not considered significant.

         INTEREST RATE RISK. Our investment policy was designed to maximize
safety and liquidity while maximizing yield within those constraints. At
September 30, 2003, our investments consisted of U.S. Agency issues, letters of
credit, and money market funds. The weighted average maturity of our portfolio
is 228 days. Because of the relatively short-term nature of our investments, our
interest rate risk is not considered significant.

ITEM 4.: CONTROLS AND PROCEDURES

         (a) Within the 90 days prior to the date of filing of this report, we
         carried out an evaluation, under the supervision and with the
         participation of our management, including our Chief Executive Officer
         and Chief Financial Officer, of the effectiveness of the design and
         operation of our disclosure controls and procedures pursuant to
         Exchange Act Rule 13a-14. Based upon that evaluation, our Chief
         Executive Officer and Chief Financial Officer concluded that our
         disclosure controls and procedures are effective in timely alerting
         them to material information relating to us (including our consolidated
         subsidiaries) required to be included in our periodic SEC filings.

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         (b) There have been no significant changes in our internal controls or
         in other factors that could significantly affect internal controls
         subsequent to the date we carried out this evaluation.

                                       38

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                      CHAMPIONSHIP AUTO RACING TEAMS, INC.

                           PART II - OTHER INFORMATION

Item 1.           Legal Proceedings.

                  On March 26, 2002, the Company filed a complaint against
                  Joseph F. Heitzler, a former director and former chairman,
                  chief executive officer and president of the Company in U.S.
                  District Court, Eastern District of Michigan, Southern
                  Division. The complaint alleged that Mr. Heitzler breached his
                  employment contract, breached his fiduciary duties and
                  intentionally or recklessly omitted to disclose information to
                  the Company in order to induce the continuation of Mr.
                  Heitzler's employment agreement. The suit sought damages of an
                  unspecified amount. On March 28, 2002, Mr. Heitzler filed a
                  complaint against the Company in the Superior Court of the
                  State of California, County of Los Angeles. The suit sought
                  compensatory, exemplary and punitive damages in excess of $2.0
                  million for breach of contract, fraud, negligent
                  misrepresentation, breach of covenant of good faith and fair
                  dealing and declaratory relief. An amended complaint adding a
                  count for tortious breach of contract in violation of public
                  policy was filed on April 9, 2002. These claims weresettled in
                  August 2003 and the Company paid $1.7 million in settlement of
                  any and all claims.

Item 3.           Defaults Upon Senior Securities

                  In July 2002, the Company guaranteed a $1.8 million commercial
                  term loan in connection with the operations of Raceworks, LLC.
                  The Company subsequently acquired this loan in conjunction
                  with the acquisition of Raceworks, LLC and has recorded the
                  loan in its long-term debt as of September 30, 2003. The
                  principal on the loan shall be paid quarterly, commencing on
                  October 31, 2003 and on the last day of each January, April,
                  July and October thereafter, in the amount of $50,000 per
                  quarter. The entire unpaid principal amount of the loan and
                  all accrued and unpaid interest and other amounts payable
                  thereunder shall be due and payable in July 2007. At June 30,
                  2003 and September 30, 2003, the Company was in default of
                  certain financial covenants for which a waiver will be
                  requested. These financial covenants require that total
                  stockholders' equity of the Company not be below $75 million.
                  As a result the entire amount of the note has been classified
                  as current.

                  On March 7, 2003, the Company issued a promissory note of
                  $722,000 in conjunction with the acquisition of Raceworks,
                  LLC. Commencing on the payment due dates, any unpaid principal
                  bears interest at ten percent (10%) per annum. A payment of
                  $473,000 was due on October 8, 2003. The Company was in
                  default of the payment provisions of the note by not
                  presenting payment by that date. As a result, the entire
                  amount of the note is due and payable and has been classified
                  as current

Item 4.           Submission of Matters to a Vote of Security Holders

                  The annual meeting of stockholders of the Company was held on
                  July 17, 2003 in Indianapolis, Indiana, and the following
                  directors were elected to serve a term of one year:

                        Robert D. Biggs        Christopher R. Pook
                        Carl A. Haas           Rafael A. Sanchez
                        James F. Hardymon      Frederick Tucker
                        James A. Henderson     Derrick Walker

                  At such annual meeting of stockholders, the following item was
                  voted on by the stockholders:

                           To ratify the appointment of Deloitte & Touche LLP as
                           the independent accountants for the year ended
                           December 31, 2003:

Votes in Favor     Votes Against/Withheld     Abstentions/Broker Non-Votes
--------------     ----------------------     ----------------------------
  12,018,781              104,647                           0

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Item 6.           Exhibits and Reports on Form 8-K.

                  (a) Exhibits.

                           31.1   Form 10-Q Certification by Christopher R.
                                  Pook, Chief Executive Officer dated as of
                                  November , 2003.

                           31.2   Form 10-Q Certification by Thomas L. Carter,
                                  Chief Financial Officer dated as of November ,
                                  2003.

                           32.1   Section 906 Certification by Christopher R.
                                  Pook, Chief Executive Officer dated as of
                                  November , 2003.

                           32.2   Section 906 Certification by Thomas L. Carter,
                                  Chief Financial Officer dated as of November ,
                                  2003.

                  (b) Reports on Form 8-K.

                           99.4   Item 9. Regulation FD Disclosure dated July
                                  23, 2003, releasing updated annual guidance
                                  information.

                           99.5   Item 9. Regulation FD Disclosure/Item 12.
                                  Results of Operations and Financial Condition
                                  dated August 11, 2003, releasing earnings
                                  information.

                           99.6   Item 9. Regulation FD Disclosure dated August
                                  18, 2003, announced the receipt by the Company
                                  of a proposal from Open Wheel Racing Series
                                  LLC to enter into a letter of intent
                                  contemplating the acquisition of all of the
                                  outstanding shares of the Company for
                                  approximately $0.50 cash per share.

                           99.7   Item 5. Other Events and Regulation FD
                                  Disclosure dated August 19, 2003, announced
                                  the resignation of Derrick Walker from the
                                  Company's Board of Directors.

                           99.8   Item 5. Other Events and Regulation FD
                                  Disclosure dated August 21, 2003, announced
                                  the resignation of Robert Biggs from the
                                  Company's Board of Directors.

                           99.9   Item 9. Regulation FD Disclosure dated August
                                  24, 2003, announced continued negotiations
                                  with Open Wheel Racing Series LLC with respect
                                  to all terms related to a possible acquisition
                                  of the Company.

                           99.10  Item 5. Other Events and Regulation FD
                                  Disclosure dated September 10, 2003, announced
                                  signed a definitive agreement providing for
                                  Open Wheel Racing Series LLC to acquire the
                                  Company for cash equivalent to $0.56 per
                                  share, based on the number of shares of the
                                  Company's common stock currently outstanding.

                           99.11  Item 5. Other Events and Regulation FD
                                  Disclosure dated September 18, 2003, announced
                                  that Open Wheel Racing Series LLC had not
                                  exercised its right to terminate the merger
                                  agreement on or prior to September 18, 2003.

                           99.12  Item 5. Other Events and Regulation FD
                                  Disclosure dated October 3, 2003, announced
                                  the resignation of Carl Haas from the
                                  Company's Board of Directors.

                           99.13  Item 5. Other Events and Regulation FD
                                  Disclosure dated October 6, 2003, announced
                                  the receipt of formal notification from the
                                  New York Stock Exchange that the Company had
                                  fallen below the NYSE continued listing
                                  criteria

                           99.14  Item 5. Other Events and Regulation FD
                                  Disclosure dated October 16, 2003, announced
                                  that effective Wednesday, October 15, 2003,
                                  the Company's common stock will be quoted on
                                  the OTC Bulletin Board (OTCBB) under the
                                  ticker symbol CPNT.OB.

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                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                            CHAMPIONSHIP AUTO RACING TEAMS, INC.

Date: October 30, 2003                      By:  /s/  Thomas L. Carter
                                                 -------------------------------

                                                 Thomas L. Carter
                                                 Chief Financial Officer

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